Platform

Author: Luca Belli

According to the Merriam-Webster dictionary, the concept of platform generally refers to a plan or design. The Historical Larousse dictionary suggests that the term first appeared in the French language in 1434, to define a “horizontal surface acting as a support”. This original meaning helps to construct a general characterization of the platform as a structure on top of which something – be it a product or a service – may be built and operated. Hence, platforms can be seen as the technical and governance structures (Belli, 2021)¹ that facilitate relationships and the exchange of value between different categories of users.

When a platform is qualified as ‘digital’ or ‘online’, it may refer to a vast array of software applications that are frequently loosely defined. Such platforms provide a governance structure, via their private ordering, and technical architecture, via a wide range of standards, protocols, and algorithms, that facilitate user interactions and exchange of value at scale, thus unleashing network effects. As pointed out by the European Commission (2016b)², the term is frequently utilized to refer to ‘two-sided’ or ‘multi-sided’ markets (Rochet; Tirole, 2003³; Evans, 2003⁴). In such markets, users are brought together by a platform operator in order to facilitate interaction (exchange of information, a commercial transaction, etc.). In the context of digital markets, depending on a platform’s business model, users can be buyers of products or services, sellers, advertisers, software developers, etc.

Conspicuously, the existence of multi-sided platforms is not a phenomenon that can be defined as exclusively taking place in the online world. On the contrary, the history of businesses demonstrates that platforms emerge in a wide range of sectors, in the offline world, as well as in the online world. In this sense, the European Commission (2016b)⁵ stresses that examples vary from markets to newspapers: both gather sellers and buyers in a common space thereby facilitating contact between two sides that would otherwise be unlikely to interact. Nevertheless, ‘real life’ platforms were usually limited physically and geographically (the merchandise had to be transported and stocked, a paper had limited circulation and advertisements had to be location-specific, etc.)

Tiwana (2014)⁶ provides a useful definition of platforms as “the extensible codebase of a software-based system that provides core functionality shared by apps that interoperate with it, and the interfaces through which they interoperate”. Due to the heterogeneous nature of digital platforms, many studies on digital platforms provide examples to clarify what they refer to when discussing digital platforms. This is the case, for instance in the European Commission (2016a)⁷ Communication on Online Platforms and the Digital Single Market, where the characteristics of digital platforms are listed and described, providing examples of platforms, rather than defining them.

Notably, the aforementioned document highlights the following characteristics of online platforms:

• they have the ability to create and shape new markets, to challenge traditional ones, and to organise new forms of participation or conducting business based on collecting, processing, and editing large amounts of data;
• they operate in multisided markets but with varying degrees of control over direct interactions between groups of users;
• they benefit from ‘network effects’, where, broadly speaking, the value of the service increases with the number of users;
• they often rely on information and communications technologies to reach their users, instantly and effortlessly;
• they play a key role in digital value creation, notably by capturing significant value (including through data accumulation), facilitating new business ventures, and creating new strategic dependencies.

To provide a very broad and comprehensive definition, the Recommendations on Terms of Service and Human Rights developed by the IGF Coalition on Platform Responsibility define a platform as “as any applications allowing users to seek, impart and receive information or ideas according to the rules defined into a contractual agreement”.

Overall, the majority of digital platforms share three main features: they are technologically mediated, they enable interactions between different types of users and allow those types of users to implement specific activities (de Reuver, Sørensen, Basole, 2018)⁸. Existing literature points out the existence of three broad categories of online platforms:

• Market-makers bring together two distinct groups that are interested in trading, increase the likelihood of a match, and reduce search costs.
• Audience makers match advertisers to audiences.
• Demand coordinators, such as software platforms, operating systems, and payment systems coordinate demand between different user groups (for example card holders and merchants, developers and smartphone users).

Hence, platforms provide a medium where one type of platform users can deliver value both to the other type of users and the platform itself. In this context the European Commission (2016b)⁹ points out that the demand of the different types of users is related to the supply of other types, and several kinds of interdependencies may exist between the various types of platform users:

• producers  of  complementary  products  (e.g. app developers) and end consumers (gamers),
• advertisers and readers
• shoppers and sellers
• job seekers and recruiters
• accommodation providers and accommodation seekers
• transportation providers and passengers.

Importantly, major online platforms trigger important network effects and generate revenue by recruiting one type of users (e.g., advertisers) and offering them access to another type of users (e.g., individual users of social networks).

Critically, platforms define a private ordering – through their terms of service, their technical architectures, and their practices – that directly impact their users as well as the products and services built on top of them (Belli; Venturini, 2016¹⁰; Belli; Sappa, 2017¹¹; Belli; Zingales, 2017¹²).

References

1. Belli L. (2021). Structural Power as a Critical Element of Social Media Platforms’ Private Sovereignty. In: Edoardo Celeste, Amélie Heldt and Clara Iglesias Keller (eds). Constitutionalising Social Media. (2022). Hart. (forthcoming)
2. European Commission. (2016b). Online Platforms Accompanying the document Communication on Online Platforms and the Digital Single Market. Commission Staff Working Document {COM(2016) 288 final. 
3. Rochet, J.-C., Tirole, J. (2003). Platform Competition in Two-sided Markets. Journal of the European Economic Association, 1(4), 990-1029.
4. Evans, D. (2003). Some Empirical Aspects of Multi-sided Platform Industries, Review of Network Economics, 2(3), 2194-5993.
5. European Commission. (2016b). Online Platforms Accompanying the document Communication on Online Platforms and the Digital Single Market. Commission Staff Working Document {COM(2016) 288 final. 
6. Tiwana, A. (2014). Platform Ecosystems Aligning Architecture, Governance, and Strategy.
7. European Commission. (2016a). Online Platforms and the Digital Single Market Opportunities and Challenges for Europe. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. COM/2016/0288 final.
8. de Reuver, M., Sørensen, C., Basole, R. C. (2018). The Digital Platform: A Research Agenda. Journal of Information Technology, 33(2), 124–135.
9. European Commission. (2016b). Online Platforms Accompanying the document Communication on Online Platforms and the Digital Single Market. Commission Staff Working Document {COM(2016) 288 final. 
10. Belli L., Venturini J. (2016). Private ordering and the rise of terms of service as cyber-regulation. Internet Policy Review. Vol 5. N° 4. Available at: https://policyreview.info/articles/analysis/private-ordering-and-rise-terms-service-cyber-regulation.
11. Belli L., Sappa C. (2017). The Intermediary Conundrum: Cyber-regulators, Cyber-police or both? JIPITEC. Available at: http://www.jipitec.eu/issues/jipitec-8-3-2017/4620.
12. Belli, L.; Zingales, N. (2017). Platform regulations: how platforms are regulated and how they regulate us. Leeds. Available at: https://eprints.whiterose.ac.uk/150002/.