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I M A G E B Y A N D R I J B O R Y S A S S O C I A T E S , U S I N G S H U T T E R S T O C K

Apple, Amazon, Alphabet-Google, Facebook, Alibaba, and Tencent—are all “hybrids” that combine transaction and innovation platforms. Several colleagues and I recently measured their performance, comparing the largest 43 publicly listed platform companies to 100 of the largest firms in the same businesses over a 20-year period. They all had comparable annual revenues in 2015 (the year we compiled our list) of between $4.3 billion and $4.8 billion. But platforms achieved these sales with half the

UBER AND LYFT, as well as Airbnb, WeWork (We Co.), and other sharing-economy startups, offer valuable ser- vices, albeit with different levels of financial success (see “The Sharing Economy Meets Reality, Communications, January 2018). What most of these ventures have in common is they function as transaction platforms. That is, they bring together two or more market sides to exchange information, goods, or services, including advertisements. The businesses can grow rapidly through the power of network effects whereby one market actor (for example, sellers) attracts another side (for example, buyers) in a self-reinforc-ing positive feedback loop. The more populated one side becomes, the more value and participation we see on the other side. Transaction platforms contrast with innovation platforms, such as Microsoft Windows, Apple iOS, Google Android, or the Facebook and WeChat APIs. These foundational products or technologies generate network effects by linking users with third-party providers of applications and services. 5

All platforms connect multiple
market participants and can get big
fast if they generate strong network ef-
fects and do not have a lot of digital or
conventional competition. But there
are significant differences in business
models. Microsoft and Apple mostly
sell products. Google gives away soft-
ware and digital services but then sells
advertisements. Airbnb matches peo-
ple with rooms for rent to possible
renters and charges a fee when a
match occurs. We Work is really a “one-
sided company platform” in that it
leases office space and then resells it
on short-term arrangements.

The most valuable publicly listed firms in the world today—Microsoft,

Technology Strategy
and Management
‘Platformizing’ a Bad
Business Does Not
Make It a Good Business
Transaction platforms link third-party applications and services providers with users.
DOI: 10.1145/3372918