Design Parameters of Business Models in Two-Sided Markets: Strategies for App Platforms

Abstract

App platforms are two-sided marketplaces in which apps – software for mobile devices like smartphones and tablets – are distributed. They are part of a larger ecosystem and gained popularity after Apple launched its App Store in 2008. Since then, app platforms have transformed the entire mobile communications industry. They mediate between distinct groups of customers, developers of apps and users, who are connected through indirect network effects. The interdependencies of customers, platforms and developers demand a consideration of strategic issues not covered by traditional analysis, for example with regard to pricing and fee structures, quality assurance, or ecosystem openness. An industry analysis of the app platform market indicates the importance of understanding these strategic dynamics to establish successful business models in this domain. To address the shortfalls of traditional models, we bring together literature on platform management with economics literature on two- and multi-sided markets in order to establish a suitable framework for an analysis of app platforms. We apply this framework to derive and discuss critical design factors for business models in app platform markets at different life cycle stages (design, launch and competition). In doing so, we contribute to a more fine-grained template for both research and managerial decisions within this important part of the mobile ecosystem.