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There are many ways to monetize platform, based on these theories : Charging all users. As we've noted, platform businesses rarely charge all their users
There are many ways to monetize platform, based on these theories :
- Charging all users. As we've noted, platform businesses rarely charge all their users the way pipeline businesses generally do. Charging all users would, in most cases, discourage participation, thereby reducing or destroying network effects. However, in a few cases, charging all users actually enhances network effects. In the offline world, for instance, prestigious membership organizations like country clubs charge all members. High membership dues (along with vetting processes such as requiring recommendations from existing members) serve as curating techniques to guarantee member quality. Some online platforms use this modelfor example, Carbon NYC, a platform for multimillionaire residents of New York City. However, in many social and business settings, "willingness to pay" and "quality" are far from synonymous, so this pricing system must be used very carefully and selectively.
- Charging one side while subsidizing another. Some platforms are able to charge members of one category of users (call them A) provided they allow members of another category of users (B) to participate for freeor even subsidize or incentivize them. This works when users from category A highly value the opportunity to make contact with users from category Bbut the feeling is not equally reciprocated. As we've noted, bars and pubs in the offline world have long used this strategy by offering women free or discounted drinks on Ladies' Nights. Many online dating websites follow a similar strategy, incentivizing memberships for women as a way of attracting male members who will pay full freight.
- Charging most users full price while subsidizing stars. Certain platforms choose to subsidize or incentivize starssuper-users whose presence attracts large numbers of other users. In offline business, malls have been known to offer attractive lease terms to popular large retailers like Target, whose presence guarantees the customer traffic that other mall occupants will readily pay a premium for. In a similar way, online platforms like Skillshare and Indiegogo go to great lengths to court celebrity teachers and campaign creators, whose star power attracts other producers as well as large numbers of curious consumers. Microsoft learned this lesson when creating its Xbox gaming platform. Its initial monetization strategy paid game developers (producers) a one-time purchase fee while channeling ongoing user fees to Microsoft. But superstar game developer Electronic Arts refused to work on these terms and threatened to develop for Sony instead. Microsoft eventually had to succumb and agree to special terms for EA, though the details have not been publicly disclosed.
- Charging some users full price while subsidizing users who are price-sensitive. The category of users that is most sensitive to pricing is more likely to abandon the platform when charged, killing the network effect. Thus, it generally makes sense to discount or subsidize users who are price-sensitive while charging others the full freight. Real-world experience shows that it can be difficult to predict which side of a platform market is likely to be more price-sensitive. During the 1990s, the Denver real estate market experienced a glut of properties, making property owners desperate for rentals. Real estate agents charged owners broker fees, while tenants paid nothing. By contrast, during the same period, Boston had a scarcity of available properties, making would-berenters desperate to find places to stay; real estate agents charged potential tenants, while allowing owners to list their properties without paying a fee. Can you explain, what paypal, apple pay, Venmo did to monetize their platform based on the theories
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