What are Multi-Sided Platforms?
Multi-sided platforms are businesses where diverse groups of users interact for exchanges, transactions, or to engage with content. For instance, newspapers bring together advertisers and readers, while shopping malls connect retailers with shoppers.
The Digital Economy and Multi-Sided Platforms
In the digital economy, this business model has gained popularity. We see transportation platforms linking drivers with passengers, dating apps connecting men and women for dates, e-commerce platforms linking buyers with sellers (similar to shopping malls), and advertising platforms connecting consumers with businesses, much like physical newspapers.
The Role of Networks in Multi-Sided Platforms
These platforms typically rely on networks to function. The more users one side of the platform has, the more attractive it becomes for other sides to join. For example, ride-hailing apps become more appealing to drivers as more passengers use them, and online marketplaces attract more sellers with a larger customer base.
Subsidies and the Imbalance of Power
To maintain balance, platforms often subsidize one side that has more alternatives or less dependency on the platform. Nightclubs, for example, often offer discounted prices to women. From a user’s perspective, some services appear free, like internet searches, e-commerce use, or social media. However, someone else—like advertisers or vendors—likely covers these costs.
Considerations for Competitive Analysis
When examining economic competition, it’s crucial to acknowledge potential issues such as price exploitation and exclusion of competitors. However, we should also recognize the benefits for buyers, passengers, or search engine users.
Flexible Approaches and Regulation
A balanced view that considers all platform sides is necessary to explore these topics. Flexible solutions that benefit all parties should be sought when implementing measures or regulations. Rigid sanctions or regulation should only be used if absolutely necessary and don’t stifle economic activity.
Mexico’s Regulatory Framework
In Mexico, the current regulatory framework allows for the use of quasi-regulatory tools to address these issues without imposing broad preventive regulation across the digital economy. Instead, specific case-by-case solutions can be implemented.
Case-Specific Regulations
These targeted regulations are generally less intrusive than broad ones. The task for authorities is to ensure these measures are as cost-effective as possible, achieving their goals with minimal impact on businesses and consumers.
Key Questions and Answers
- What are multi-sided platforms? Multi-sided platforms are businesses where diverse user groups interact for exchanges, transactions, or content engagement.
- How do multi-sided platforms function in the digital economy? In the digital economy, these platforms link drivers with passengers, connect singles, facilitate e-commerce, and enable advertising.
- Why do multi-sided platforms rely on networks? These platforms depend on networks to maintain balance, attracting more users to each side as the network grows.
- How do platforms address power imbalances? Platforms often subsidize one side with more alternatives or less dependency, like nightclubs offering discounts to women.
- What considerations should be made in competitive analysis of multi-sided platforms? Analyze potential issues like price exploitation and exclusion, while recognizing benefits for users.
- What’s the approach to regulating multi-sided platforms? A balanced, flexible view is necessary, implementing cost-effective, case-by-case regulations.
- How does Mexico’s regulatory framework address these issues? It allows for quasi-regulatory tools targeting specific cases without broad digital economy regulation.
