Module Note | September 2006 (Revised October 2007)

Platform-Mediated Networks: Definitions and Core Concepts

by Thomas R. Eisenmann

Abstract

Defines platform-mediated networks and introduces concepts central to their study. First, it defines networks and network effects; explains how network effects influence users' willingness-to-pay for network access; describes factors that determine the strength of network effects; discusses how a network's success may depend upon users' expectations about its growth prospects; defines network externalities and their significance; presents a taxonomy of networks based on the number of distinct user groups--sides--that they encompass; and explains why network effects should be viewed as demand-related rather than supply-related scale economies. Second, it defines platforms; describes different roles that firms play in platform creation and maintenance; discusses platform boundaries, for example, the distinction between platform providers and network users; and presents schemes for categorizing platforms based on their principal function, the structure of the networks they serve, and who controls them.

Keywords: Consumer Behavior; Network Effects; Market Platforms; Information Technology; Technology Networks; Technology Platform;

Citation:

Eisenmann, Thomas R. "Platform-Mediated Networks: Definitions and Core Concepts." Harvard Business School Module Note 807-049, September 2006. (Revised October 2007.)