scholarly journals Digital Data, Platforms and the Usual [Antitrust] Suspects: Network Effects, Switching Costs, Essential Facility

2019 ◽  
Author(s):  
Catherine E. Tucker
Keyword(s):  
Network Effects ◽  
Switching Costs ◽  
Digital Data ◽  
Essential Facility

Capturing Value in Platform Business Models That Rely on User-Generated Content

2021 ◽  
Author(s):  
Hemang Subramanian ◽  
Sabyasachi Mitra ◽  
Sam Ransbotham
Keyword(s):  
Network Effects ◽  
Business Models ◽  
Switching Costs ◽  
Service Level ◽  
User Generated Content ◽  
Organizational Boundaries ◽  
Considerable Uncertainty ◽  
Current Usage ◽  
Significant Interest ◽  
Using Data

Business models increasingly depend on inputs from outside traditional organizational boundaries. For example, platforms that generate revenue from advertising, subscription, or referral fees often rely on user-generated content (UGC). But there is considerable uncertainty on how UGC creates value—and who benefits from it—because voluntary user contributions cannot be mandated or contracted or its quality assured through service-level agreements. In fact, high valuations of these platform firms have generated significant interest, debate, and even euphoria among investors and entrepreneurs. Network effects underlie these high valuations; the value of participation for an individual user increases exponentially as more users actively participate. Thus, many platform strategies initially focus on generating usage with the expectation of profits later. This premise is fraught with uncertainty because high current usage may not translate into future profits when switching costs are low. We argue that the type of user-generated content affects switching costs for the user and, thus, affects the value a platform can capture. Using data about the valuation, traffic, and other parameters from several sources, empirical results indicate greater value uncertainty in platforms with user-generated content than in platforms based on firm-generated content. Platform firms are unable to capture the entire value from network effects, but firms with interaction content can better capture value from network effects through higher switching costs than firms with user-contributed content. Thus, we clarify how switching costs enable value for the platform from network effects and UGC in the absence of formal contracts.

Individual Motivations and Network Effects

2015 ◽  
Vol 659 (1) ◽  
pp. 180-190 ◽  
Author(s):  
Brooke Foucault Welles ◽  
Noshir Contractor
Keyword(s):  
Social Relationships ◽  
Second Life ◽  
Virtual World ◽  
Social Relationship ◽  
Network Effects ◽  
Preferential Attachment ◽  
Network Modeling ◽  
Digital Data ◽  
Relationship Formation ◽  
Network Analytics

This article explores the relative influence of individual and network-level effects on the emergence of online social relationships. Using network modeling and data drawn from logs of social behavior inside the virtual world Second Life, we combine individual- and network-level theories into an integrated model of online social relationship formation. Results reveal that time spent online and the network pressure toward balance (individuals tending to form relationships with others who have relationships in common) predict the emergence of online relationship ties, while gender, age, proximity, homophily (the tendency of individuals to form relationships among people with similar traits), and preferential attachment are not significant predictors within the observed networks. We discuss these results in light of existing research on online social relationships and describe how digital data and network analytics enable novel insights about the emergence of online social relationships.

Scope and Timing of Deployment

2011 ◽  
pp. 122-141
Author(s):  
Joel West ◽  
Jason Dedrick
Keyword(s):  
Network Effects ◽  
Switching Costs ◽  
Network Effect ◽  
Organizational Level ◽  
Relative Advantage ◽  
Internal Standardization ◽  
Level Variable ◽  
Purpose Computer ◽  
Special Purpose Computer ◽  
Limited Scope

Here we present a qualitative study of how organizations do (or do not) adopt a new computer server platform standard; namely, Linux using PC-compatible hardware. While discussions of Linux typically focus on its open source origins, our respondents were interested primarily in low price. Despite this relative advantage in price, incumbent standards enjoyed other advantages identified by prior theory; namely, network effects and switching costs. We show when, how, and why such incumbent advantages are overcome by a new standard. We find that Linux adoption within organizations began for uses with a comparatively limited scope of deployment, thus minimizing network effect and switching costs disadvantages. We identify four attributes of information systems that potentially limit the scope of deployment: few links of the system to organizational processes, special-purpose computer systems, new uses, and replacement of obsolete systems. We also identify an organizational level variable—internal standardization— which increases scope of deployment and, thus, the attractiveness of the incumbent standard.

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