Incentives to drive digital platform adoption

Delivering consistent experiences for ecosystem stakeholders through a single view of the ecosystem

This article is part of the Digital Platforms hub

Most platforms starting from scratch have little value in and of themselves. Producers of value will not come on board unless there are consumers, and consumers will not find the platform useful without any production. Most platform firms face this chicken-and-egg challenge. Who does one get on board first: the producers or the consumers? And why will one side come on board, when the other side is not there?

Broadly, platform firms may employ one of two types of strategies: sequential strategies and simultaneous strategies. Using sequential strategies, the platform gets either producers first or consumers first on board. Using simultaneous strategies, as the name suggests, the platform gets both producers and consumers on board at the same time.

OpenTable employed a producer-first sequential strategy to get restaurants on board by providing restaurant management software as an initial hook before any consumers signed up. Conversely, Megaupload seeded pirated content on its site as an initial hook to attract consumers on board in a consumer-first sequential strategy, and subsequently, converted some consumers to producers of content.

Another way to employ sequential strategies is to empower producers to bring consumers on board. Project creators host their projects on Kickstarter and subsequently spread the word about their project among their followers and friends. This act of spreading the word fuels the feedback loop and the producers themselves participate in the act of getting consumers on board. Some of these consumers then become producers – and the virtuous cycle is set into motion.

The platform firm may also kickstart adoption by acting as the first producer at scale. Amazon started out as a retailer before moving to a marketplace model. The education marketplace Udemy also applied this strategy by initially producing its own courses. On B2B platforms, a large business customer can act as the first consumer to kickstart platform adoption. Procter & Gamble started its Connect + Develop innovation platform by acting as the first consumer on the platform.

Platforms may also be seeded by acquiring both producer and consumer roles at the same time – through employing simultaneous strategies. In order to get both sides on board simultaneously, the platform must leverage or integrate with a high concentration of existing activity between these two producer and consumer roles. There are various approaches to executing this strategy.

The first approach involves launching the platform in concentrated geographic hubs of activity. Facebook, for instance, first launched as a closed network within Harvard  University to harness existing activity among students.

The second approach leverages unusually high concentration of activity during specific periods or events. For example, Twitter launched at industry conferences and Tinder launched at fraternity parties. In both cases, event participants were already interacting at the event and the platform facilitated these interactions better.

A third strategy involves integrating with – or piggybacking – another digital network which already has a high degree of activity. LinkedIn gained much of its initial traction by integrating with Microsoft Outlook as users’ business connections already existed on Outlook. WhatsApp was one of the earliest platforms to piggyback the phone contacts list. It would automatically compare all of the phone numbers of a new user’s phone contact list to the existing WhatsApp user database. This allowed it to scrape the address book and pre-seed the WhatsApp network for the user, without the user having to manually add connections. When Airbnb launched, it initially piggybacked activity on Craigslist through a reverse integration, to attract Craigslist hosts and travelers who were already interacting with each other. Airbnb provided superior trust through a rating system and an improved search and navigation experience, combined with an integrated payments platform, all of which helped it attract hosts and travelers away from Craigslist. Finally, Instagram gained traction by piggybacking Facebook, allowing users to share pictures with their Facebook network and gain more users.