Remember Enron Bandwidth Trading? That was a Proposed Platform

With the emergence of platform business models, the issue is whether telecommunications firms can act as platforms or two-sided markets. Enron tried to create such a platform in 1999.

A platform acts as a marketplace or exchange, and makes its money facilitating transactions between buyers and sellers. A platform typically does now own the actual products being purchased. 

A two-sided market facilitates transactions between buyers and sellers. In some cases, a two-sided market earns revenue from at least two parties to a transaction. A newspaper or magazine can be thought of as using a two-sided market model, earning recurring fees from subscribers and advertising from firms who want to put messages in front of those customers.

Complicating matters, some argue any two-sided market is a platform; or that any platform is a two-sided market. Others would disagree with one or both propositions. 

Some argue a two-sided market is a functional definition of a platform, bringing buyers and sellers together. Others might argue that a platform and a two-sided marketplace are not synonymous. 

Operating systems sometimes are said to be examples of platforms and two-sided markets. The OS might be a platform, but it is not a two-sided market, only a tool used to create a two-sided market. Apple’s IoS supports the AppStore, which brings together developers and users. But the OS is not itself a market. It is better considered a platform. But the point is that two-sided markets and platforms are, in fact, not synonymous. 

source: ExcellentWebWorld 

Videogame consoles, on the other hand, might be viewed both as enablers of a two-sided business model and an ecosystem, the creation of which is one common function of a platform. In an ecosystem, participants might create buyer-seller connections on either side of the platform (buyers with buyers; sellers with sellers), not just buyers and sellers. EBay or any similar marketplace provides an example of an ecosystem.

So do many other app-based platforms including ridesharing, short-term accommodations or other forms of asset sharing or rental. 

Sometimes buyers become sellers; sometimes sellers become buyers. 

True, two-sided businesses bring buyers and sellers together. The credit card market provides an example, where the cardholders and merchants are brought together in payment transactions by the third party acting as the clearinghouse. In that scenario, Visa or MasterCard act as the clearinghouse, while the two sides of the buyer-seller transaction are retailers and customers. 

Health maintenance organizations mediate transactions between patients and doctors. Many ad-supported content or media businesses are two-sided marketplaces, if not platforms. Magazines, newspapers, TV and radio stations and most programming networks or video production studies operate as two-sided markets, if not always as platforms. 

Social networks and search engines are classic two-sided markets, with advertisers and consumers being the two parties brought together by the platform, operating as a two-sided marketplace. To return to the question: can connectivity services suppliers create two-sided markets, or become platforms?

Yes and no. “Yes” as owners of media and content properties earning different types of revenue from different sets of users: earning money from consumers who buy subscriptions to content and also earning money from sellers who want access to the consumer or customer base using advertising. 

“Yes” when a connectivity provider owns a marketplace in e-commerce, ridesharing, lodging or any other product, making its money as a fee or commission on marketplace transactions. 

But “no” when referring to any connectivity service sold to either consumers or business customers. Platform operation is conceptually possible. 

The platform model was unsuccessfully promoted by Enron in 1999 when it proposed bandwidth trading exchanges, for example, Enron proposed creating a trading exchange for bandwidth purchases on the model of trading exchanges for other commodities such as corn, sugar, gold or copper. 

Were such an exchange feasible, it would allow some third party to facilitate bandwidth purchases by buyers and sellers in roughly the same manner as accomplished by any consumer e-commerce site. The platform would makes its money as a fee for facilitating such transactions, without owning any of the actual network assets. 

So far, it has proven impossible to create true platforms for connectivity services, though media operations sometimes can use two-sided market revenue models.