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The Growth and Development of Online Commerce: The Internet Platform Business Model

By Sammy J. Chapman Jr.

The Internet Platform Business Model

As commerce moved to the internet, it evolved and expanded into many aspects of daily life. Likewise, the way scholars and experts talk about internet companies and their unique business models has evolved. An early look at the platform company concept, Phil Simon’s The Age of the Platform: How Amazon, Apple, Facebook, and Google Have Redefined Business, was written with an emphasis on how small businesses can use the internet to create their own platform companies and partner with companies such as Apple, Facebook, and Google. In The Network Imperative: How to Survive and Grow in the Age of Digital Business Models, Libert, Beck, and Wind contend that companies must move to platform business models in order to survive and remain successful. They give details on not only how to build a platform, but also how to make the all-important connections between participants to buy and sell goods and to engage in other online activities, such as sharing information, building connections, and giving reviews. This book is full of case studies of successful companies that moved from traditional business models to platform business models and expanded their businesses.

Placing more emphasis on how platform companies impact industries, Parker, Van Alstyne, and Choudary’s Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You explains in detail the platform business model. Highlighting its advantages, this work gives clear explanations of what platform companies are, how they operate, how they can be managed, and how the government should regulate them. Written by three researchers who have studied platform companies since the early 2000s, Cusumano, Gawer, and Yoffie’s The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power looks at the common mistakes made by early adopters of the platform business model, such as Microsoft, Intel, and Apple. This book is aimed at managers and entrepreneurs and also dips into issues of governance and antitrust. Scott Galloway’s The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google analyzes business models and looks at how these major companies not only will impact their industries but also forecasts how they will impact society at large. Galloway details how advertising is an important component of each of these tech giants’ businesses. Setting this book apart is Galloway’s unique take on how these companies will change society and his career advice to individuals on how to navigate the digital age.

A host of books scrutinize the economics of the platform business model or offer critiques of it. Evans and Schmalensee’s Matchmakers: The New Economics of Multisided Platforms and Fisman and Sullivan’s The Inner Lives of Markets: How People Shape Them and They Shape Us look to economic theory to explain how two-sided and multisided markets work. They detail the work of economists and give examples of how economic theories manifest in online markets, like eBay and Uber. Jonathan A. Knee’s The Platform Delusion: Who Wins and Who Loses in the Age of Tech Titans examines the downsides of this rapidly growing business model. He argues that platform businesses existed before the internet and that the advantages attributed to online business, such as network effects, are uncommon or too unsustainable to ensure business success. In Direct: The Rise of the Middleman Economy and the Power of Going to the Source, law professor Kathryn Judge studies the market power of large platform companies such as Amazon, and compares their growth to Walmart. She points out that, for many consumers, a large platform company may be the only place they look for products online. The author details how online companies use customer data and technology to encourage overconsumption and maximize profits through price discrimination between customers. The book offers remedies for these problems and ways of building platforms that would be more equitable for online shoppers.

A final set of books on this topic focuses more on individual users and the communities they build. Marina Krakovsky examines how individuals use e-commerce platforms to create businesses and careers in The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit. Drawing on examples from Craigslist, Uber, and eBay, Krakovsky shows the different roles these middlemen play in digital marketplaces. Michele White’s Buy It Now: Lessons from eBay looks at the dynamics between small sellers and eBay and the power eBay exerts on them. Exploring the concept of community on the platform, White views eBay through the lenses of gender, sexuality, and race. 

Works Cited