Don't Let Platforms Commoditize Your Business

Large digital multisided platforms (MSPs) such as Amazon, Alibaba, and Apple's App Store have made it much easier for sellers to reach new customers, but as thousands of companies large and small have discovered, conducting business on them carries significant risks and costs. MSPs sometimes exploit sellers' dependency on them in various subtle and not-so-subtle ways. They raise fees. They change their recommendation algorithms to put more emphasis on price. They require sellers to advertise to maintain visibility in search results. They compete against sellers by imitating their products. They impose restrictions on the prices sellers can set outside of the MSP. And they change their rules and design in ways that weaken sellers' relationships with their customers. But all is not lost, say the authors. Sellers can employ four strategies to build viable businesses on platforms. They can develop and invest in direct channels, use platforms mainly as showrooms, go deep with highly specialized offerings or go broad with many different offerings, and wage public relations and lobbying campaigns to curb platforms' power.