Platforms fail if multi homing risk is not mitigated!
Updated: Feb 10
In my last post, I explained how disintermediation is the biggest risk for a platform and platforms need to find a way to avert it. You can read the post with the below link
Today, let us discuss how Multi-Homing is another threat and how platforms can overcome it.
Multi-homing happens when the buyers and sellers of a platform are active on multiple such platfroms and looking for lower prices or other incentives to transact in that platform. A classic example of this is Uber and Ola. Most of the riders and drivers have both apps on their phone and transact on both. There is hardly any cost for transacting on the other platform. This would mean that both Ola and Uber eat into each of their revenues because of both riders and drivers not sticking to any one of them. So, how can platform companies overcome this problem. They should create a mechanism for lock ins. Facebook did this very well. Since, all of our friends network in Facebook, we continue to be in Facebook and do not want to jump into a different social media platform. Both Ola and Uber are trying to overcome this problem by reducing the drivers wait time at their current destinations after finishing the ride. Also, the incentives are designed in such a way to carry out more rides in a given period encouraging them to continue on the same platform. Amazon does this with Prime and Free shipping for Prime customers. So, platform companies should overcome the problem of Multi-Homing to sustain in the long run.