Design Rules Volume 2: Chapter 20—Digital Exchange Platforms: The Technologies of Crowdsourcing and Peer Production

Abstract

As digital technology evolved under the impetus of Moore’s Law, a group of new “exchange” platforms emerged that focused on facilitating transactions and/or communications between different parties. Exchange platforms are characterized by having “sides”. The simplest have two sides: buyers and sellers in the case of transaction platforms and senders and recipients of messages in the case of communication platforms. However, many exchange platforms have three, four or more sides. The purpose of this chapter is to place digital exchange platforms in the same theoretical framework as standards-based and logistical platforms. I first define exchange platforms and show how their value can be represented using value structure maps and equations. I then describe the main problem facing platform sponsors: coordinating sides to share the same flow of transactions or messages. Modern digital exchange platforms make use of five critical technologies: (1) crowdsourcing; (2) peer production; (3) search and ad placement; (4) dynamic pricing; and (5) data analysis and prediction. The first two technologies, crowdsourcing and peer production, dramatically expanded the ecosystems of exchange platforms, and are the focus of this chapter. The last three have become the key to value capture by platform sponsors and are treated in the next chapter.