Classroom Companion: Business

MSP
Type of business
User groups
Platform type
New York Times
Newspaper
Readers and advertisers
Digital
eBay
Electronic marketplace
Sellers and buyers
Tangible
Facebook
Social networking service
Users and advertisers
Digital
Uber
Sharing service
Drivers and passengers
Tangible
Airbnb
Sharing service
Hosts and guests
Tangible
MasterCard
Point-of-sale transactions
Merchants and cardholders
Digital
Kickstarter
Crowdfunding
Borrowers and investors
Digital
10.2 · Characteristics of Multisided Platforms

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10
MasterCard are examples of digital MSPs, whereas Uber and Airbnb are examples 
of tangible MSPs. Tangible MSPs have also been termed online-to-offline (O2O) 
MSPs (McAfee & Brynjolfsson, 
2017
). 
.
Table 
10.1
lists some two-sided platform 
businesses.
Some of the major characteristics of MSPs are associated with network effects, 
pricing, competition, business ecosystem, and market regulation (Ardolino et al., 
2020
).
10.2.1 
 Network Effects
The MSP may be subject to complex network effects not only involving each user 
group but also between user groups. Network effects are so important for MSPs 
that they are discussed in more detail in 
7
Sect. 
10.3
. The network effects may 
sometimes lead to winner-take-all markets where one platform supplier after some 
time becomes a de facto monopoly.
10.2.2 
 Pricing
The pricing model and, hence, the way revenues are generated may be complex. For 
example, one user group are offered platform services for free, while other cus-
tomer groups must pay for the services they receive (e.g., Facebook and Google 
Search); customers may pay per interaction or amount of service they receive, or 
they may pay a fixed monthly subscription fee (e.g., eBay and Airbnb); customers 
may pay for some types of services and receive other services free of charge (elec-
tronic newspaper); or any combination thereof.
It is a common feature of MSPs that some user groups subsidize the other user 
groups by levying differentiated charges among the user groups. Sometimes, the 
MSP gets all its revenues from only one user group while providing services for free 
to other user groups.
An MSP often benefits from a reduced price of the goods or services mediated 
between the sellers and the buyers. This is because low prices mean more sales and, 
potentially, more buyers of the goods, increasing the usage of the platform and, in turn, 
add value to the platform in terms of increased cross-side network effects. In this respect, 
MSPs have incentives to reduce prices in the business areas in which they operate.
In several of these pricing regimes, supply/demand theories are meaningless 
since the two variables are decoupled in market segments where the good is traded 
for free.