Can ‘multi-sided markets’ provide the basis for a new economy?
In its recent research, the Atos Scientific Community considers the emergence of a Data Economy and the championing of Multi-sided market platforms as a powerful disruption of traditional business models. These will benefit both businesses and consumers and ultimately blur the distinction between b2b and b2c.
In a traditional marketplace there is a seller and a buyer. The seller discloses a price for a product or service, the buyer decides if they think it is worth it and decides to purchase, or not.
However, this traditional model is not the only model anymore. Traditional differences between buyer and seller are disappearing. The internet and Web 2.0 in particular, have changed the market. ‘Sellers’ offer products without necessarily expecting financial compensation, ‘buyers’ can opt to pay with information instead of money. Companies such as Google and Facebook offer powerful tools and services for free, which would have been prohibitively expensive 15 years ago, in exchange for data on the people using their ‘free’ services.
A multi-sided marketplace has emerged where more than two parties take part in the transaction. One party offers a product for free to another party. A third party pays the seller in return for personal data or advertising ‘eyeballs’ of the buyer.
A business model based on a multi-sided market can be used to overcome certain hurdles a traditional market can’t solve, laying the foundations for a Data Economy. It also offers a way of delivering high-end services to consumers without the consumer paying for this through a traditional cash transaction. Examples of the multi-sided market in action include:
Internet in cars
Atos worked with a large European car manufacturer who was interested in getting internet into cars. Although not a technical challenge with the use of common 3G technology, the challenge turned out to be a business model one as consumers weren’t interested in paying too much for an extra data subscription for their cars. However, if consumers are willing to provide a third party insight into their driving data, this third party (eg a pay per mile insurance company) can offset the costs of the infrastructure in the car, overcoming the hurdle of who will pay for the service.
Saving on energy consumption
Another example of a potential multi-sided market is energy providers, consumers and white goods manufacturers such as washing machine or boiler manufacturers. If an energy supplier installs a smart meter and gets permission to access the usage information from the customer, a washing machine or boiler manufacturer will pay for this information and provide energy saving tips, such as energy optimisation information, product discounts and advice on equipment replacement or maintenance to the consumer. With just basic usage information a manufacturer can calculate how much energy could be saved with a new and more efficient boiler or washing machine. This multi-sided market enables the consumer to reduce their energy costs by illustrating how the cost of a new boiler or washing machine can be amortized through energy savings prompting the purchase of new equipment.The energy provider funds the installation of the smart meter through manufacturer’s purchase of customer data while supporting the consumer by enabling them to save energy.