paTTerns 78 MulTi-sided plaTForMs Multi-sided platforms, known by economists as multi- sided markets, are an important business phenomenon. They have existed for a long time, but proliferated with the rise of information technology. The Visa credit card, the Microsoft Windows operating system, the Financial Times , Google, the Wii game console, and Facebook are just a few examples of successful multi-sided platforms. We address them here because they represent an increasingly important business model pattern. What exactly are multi-sided platforms? They are platforms that bring together two or more distinct but interdependent groups of customers. They create value as intermediaries by connecting these groups. Credit cards, for example, link merchants with cardholders; computer operating systems link hardware manufac- turers, application developers, and users; newspapers link readers and advertisers; video gaming consoles link game developers with players. The key is that the platform must attract and serve all groups simultane- ously in order to create value. The platform’s value for a particular user group depends substantially on the number of users on the platform’s “other sides.” A video game console will only attract buyers if enough games are available for the platform. On the other hand, game developers will develop games for a new video console only if a substantial number of gamers already use it. Hence multi-sided platforms often face a “chicken and egg” dilemma. One way multi-sided platforms solve this problem is by subsidizing a Customer Segment. Though a platform operator incurs costs by serving all customer groups, it often decides to lure one segment to the platform with an inexpensive or free Value Proposition in order to subsequently attract users of the platform’s “other side.” One diΩiculty multi-sided platform operators face is understanding which side to subsidize and how to price correctly to attract customers. Customer Segment A Segments ≥ 2 bmgen_final.indd 78 6/15/10 5:35 PM