Skip to main content

From lock-in to "Trust us"

Ryan Kuo

What struck me in this opinion piece is the depiction of how multisided (e.g., two-sided) platforms evolve, in an animated GIF by Ryan Kuo. Platform owners feel the need to say "Trust us" at some point, long after contractual relationships are established.

Platform owners gain power and lock in participants (e.g., sellers, buyers, app developers, users) by accumulating network effects and creating switching costs*. More power leads to governance decisions that are increasingly one-sided (e.g., decisions on application approval, product listings, content sharing, or commission/fees). Conflict of interest arises quickly. Trust deteriorates.

Lack of trust can make data centric companies vulnerable to disruption in the long term, even if network effects offer a protection in the short term. One sure way not to gain trust is having to say "Trust us."

*Cross-side network effects: The more sellers on a platform, the more value for buyers. More buyers join and more sellers follow. As a seller builds a profile full of five star reviews, switching becomes costly. Lock-in can also arise from same-side network effects. In a social platform, value for a user increases with more users.

#digital #platforms #data #analytics #datacentricity