Abstract
A business model for sensor-based services is proposed where a platform creates a multi-sided market. The business model comprises a platform that serves as an intermediary between human users, app developers, and sensor networks, so that the users use the apps and the apps process the data supplied by the sensor networks. The platform, acting as a monopolist, posts a fee for each of the three sides so as to maximize its profit. This business model intends to mimic the market-creating innovation that main mobile apps platforms have generated in the smartphone sector. We conduct an analysis of the profit maximization problem faced by the platform, show that optimum prices exist for any parameter value, and show that these prices always induce an equilibrium in the number of agents from each side that join the platform. We show that the relative strength of the value that advertisers attach to the users determines the platform price structure. Depending on the value of this relative strength, two alternative subsidizing strategies are feasible: to subsidize either the users’ subscription or the developers’ registration. Finally, all agents benefit from an increase in the population at any of the three sides. This result provides a rationale for incentivizing not only the user participation, but also the entry of developer undertakings and the deployment of wireless sensor network infrastructure.
Highlights
The Internet of Things (IoT) is one of the hottest topics being debated today across industries worldwide
Among the different structures or business models that may be implemented for sensor-based services, some authors claim that the “platform” business model, with which companies such as Apple, Google, or Amazon have succeeded, is readily transferable to the Internet of Things [2]
We propose a business model for a platform that intermediates in a three-sided IoT market
Summary
The Internet of Things (IoT) is one of the hottest topics being debated today across industries worldwide. Among the different structures or business models that may be implemented for sensor-based services, some authors claim that the “platform” business model ( known as multi-sided market), with which companies such as Apple, Google, or Amazon have succeeded, is readily transferable to the Internet of Things [2]. This work proposes such a business model and analyzes the provision of sensor-based services by a platform that creates a multi-sided market.
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