Strategic considerations for the formation of internet platform products

Platforms as one of the key concepts behind many of the most successful online services play a vital role in today's internet landscape. In China a number of highly competitive products has evolved in the shadow of the BAT giants Baidu, Alibaba and Tencent. In this highly dynamic market, valuable findings regarding the formulation and evaluation of platform strategies can be established. This paper is the result of the study of significant processes and events in the Chinese internet platform market. The high growth rate of the market creates a dynamic setting that provides a unique research opportunity which is used in this study to draw practically relevant conclusions from a number of observations in the Chinese market, while verifying those conclusions with the theoretical basis that has been established in relevant literature. The main contribution of this study is thus to distill main practical relevant findings from a fast growing, dynamic market backed by an academic theoretical basis to establish a number of conclusions that serve as guidelines for practitioners in the online platform business. The study reveals two major creation scenarios for platform products in praxis: The transformation of existing products and new designs from scratch. It is of practical relevance to know the major pitfalls for either creation scenario, which is the generation of a high user number, often characterized by significant price-cutting or direct bonus payments by the competing platform operators, and the generation of a symmetry between service or product vendors and consumers using a platform. Important factors for either strategy include adequate focus on user demand, a critical mass of diverse users and suppliers and the ability of a platform to convince providers of and contribute to their long-term profitability. Successful strategies in China have been found to center on three cornerstones, namely user satisfaction, provider motivation and the ability to enable and facilitate interaction.