Review: The Rise of the ‘Matchmakers’ of the Digital Economy
By Jonathan A. Knee
Many of the young giants of the digital economy share a common characteristic. They are platforms that provide valued connections among their participants. The nature of those connections and the value they provide vary widely.
Both Google and Facebook – together approaching $1 trillion in market value — are in the business of connecting advertisers to consumers, but their platforms and business models are very different.
Another trillion-dollar pair, Apple and Microsoft, have followed similarly divergent paths in monetizing their respective platforms: Both own operating systems that connect application developers and users. And “platform” businesses of various stripes seem to represent a disproportionate share of the market’s hot tech start-ups, like Uber, Airbnb, Pinterest and Snapchat.
A surprising number of business books have been published in the last few months that seek to explore the origins and implications of the emergence of the platform paradigm. The great virtue of the best of these, “Matchmakers: The New Economics of Multisided Platforms” (Harvard Business Review) by David S. Evans and Richard Schmalensee, is that it reminds us that there is nothing new about multisided platforms – which the authors call matchmaker businesses.
The “new economics” mentioned in the subtitle refers to what the authors misleadingly call the “discovery” of multisided businesses by fellow economists in 2000. Although the research cited was certainly important in understanding the dynamics of multisided markets, advertising-based media businesses have successfully operated in these environments for literally hundreds of years.
Full Content: New York Times