A fragmented platform is at a risk of failure!
Updated: Feb 10
In my last post, I explained about how platforms can be designed to strengthen their network effects which can make or break the platform's success. You can read it with the link below
In this post, let us talk about the second criteria, which is to be able to form network clustering.
A platform could be fragmented or clustered. Take example of Uber. Most drivers would look for riders in that city. It makes no difference for those drivers if there are riders in anothe city. The same is with the riders too as they woud look for drivers in the city they are in. This means the network effect is localised and fragmented. This would mean I can start my own Uber in my city and become it's competetor. Same with many other in their cities. This makes Uber vulnerable to more and more competetion in different regions. On the other side, take example of Airbnb. Most people would want to search for an airbnb in the place they are visiting and not in the city they are living. This will be for every city they visit. So, in this case, the network effects of airbnb are clustered and so is less vulnerable to competetion on a large scale. So, how can platforms overcome this challenge of fragmented network effects. Craiglist did this well by making their housing and job listings not limited to a particular city. Twitter did this very well when they started off by making all of our favourite celebrities login to twitter and tweet and interact with fans across the globe. So, less the network effects fragmented, it is less likely to be vulnerable to competetion and sustain.