Who will win the ride sharing competition? In the USA, will one company come out on top, and drive the the other out of the market? What makes a platform defensible?
According to academics, a multi-sided marketplace will take all the winnings if it:
- has high multihoming costs
- network effects are positive and strong
- neither side’s users have a strong preference for special features
The third point is the most controversial to me. A weak preference for a feature seems counterintuitive towards network effects. An example would be Spotify over Apple Music. I don’t really have a preference to Spotify, over Apple Music. The multi-homing costs are high, considering you’re paying twice for the same thing, and there’s network effects on both sides. Both businesses fit the winner take all dynamic, but both are still in the market.
Really, what I want to drive at, is if you can build strong network effects, do either of the two other points matter much? Aren’t network effects the most important part about building a platform? I’m not sold on multihoming costs or preferences being the driver for value yet. Sure, if you can get them, it’s better.