Network Economics & Platform Companies Flashcards
The value of some offerings increases quicker the more users adopt the technology and use the offering. This effect is known as network effects in economics. Realizing network effects requires time. A critical event in this regard is called the tipping point.
Which of the following statements about the tipping point is WRONG?
The tipping point refers to the point in time where the perceived value to users exceeds the costs to adopt the new technology.
The tipping point refers to the point in time where the realized revenues exceed the costs to offer the new technology.
The tipping point refers to the point in time where the supply-push from the company shifts to a demand-pull from the customers.
The tipping point refers to the point in time when the customer base changes from early adopters to a broader user majority.
The tipping point refers to the point in time where the realized revenues exceed the costs to offer the new technology.
- Refers to the break-even-point.
A new social network company had 50,000 monthly active users at the end of the third quarter of 2020. The value of a network is numerically equivalent to the number of edges in the network. What is the value of the company’s network?
2.5 billion
Digitalization equipped companies have new means to connect different parties and build platform-based business models.
Which of the following statements describes the difference between the two BMPs “Two-sided market” and “Peer-to-peer” BEST?
“Two-sided market” allows to cross-finance parts of offerings with sales in another market, while “peer-to-peer” allows companies to generate revenue based on co-creation.
“Two-sided market” describes the mediation between distinct companies, while “peer-to-peer” describes the mediation between distinct customers.
“Two-sided market” allows companies to generate marketplace network effects, while “Peer-to-Peer” allows companies to generate complementary goods network effects.
“Two-sided market” mediates between multiple interdependent groups, while “peer-to-peer” mediates between members belonging to a homogeneous group.
“Two-sided market” mediates between multiple interdependent groups, while “peer-to-peer” mediates between members belonging to a homogeneous group.
Usually, several business model patterns can be found in platform companies that leverage network effects. Which of the following is LEAST associated with network effects?
Long tail
Lock-in
Peer-to-peer
Two-sided market
Long tail
Which of the following statements about network effects are true/false?
The value of a product or service is dependent on the number of people using it.
Every additional, new user of a good or service increases the value of that product to other people.
The value of a network is numerically equivalent to the number of nodes in the network.
The value of a network is directly proportional to the number of users in the network.
The value of a product or service is dependent on the number of people using it. TRUE
Every additional, new user of a good or service increases the value of that product to other people. TRUE
The value of a network is numerically equivalent to the number of nodes in the network. FALSE
- It is equivalent to the number of edges.
The value of a network is directly proportional to the number of users in the network. FALSE
- It grows non-linearly with regards to the number of users.
In the lecture, you have learned about multiple types of network effects, in particular same-side and cross-side network effects. Which of the following statements are true/false?
An example of same-side network effects is when the addition of every new user increases the value to the other users on a social media platform. An example of cross-side network effects is when more drivers (producers) on a ride-sharing platform make the network more valuable to riders (consumers).
Collective switching costs decrease with a growing number of users on a platform.
Same-side network effects become stronger with increasing network size.
Cross-side network effects are always positive in nature, i.e., more users in one group always has a positive effect on the other group.
An example of same-side network effects is when the addition of every new user increases the value to the other users on a social media platform. An example of cross-side network effects is when more drivers (producers) on a ride-sharing platform make the network more valuable to riders (consumers). TRUE
Collective switching costs decrease with a growing number of users on a platform. FALSE
- Collective switching costs increase with a growing number of users.
Same-side network effects become stronger with increasing network size. TRUE
Cross-side network effects are always positive in nature, i.e., more users in one group always has a positive effect on the other group. FALSE
- Cross-side network effects can also be negative.
An important part of any platform business is its core interaction. Which of the following statements are true/false with regards to the key components of the core interaction?
The tweets on Twitter can be viewed as value units of Twitter.
The filters of the core interaction rapidly gain importance as the platform grows.
It is crucial that a platform business is able to create great value units in the eyes of their users to sustain growth.
The participants in each platform business can be clearly divided into two distinct groups: producers and consumers.
The tweets on Twitter can be viewed as value units of Twitter. TRUE
The filters of the core interaction rapidly gain importance as the platform grows. TRUE
It is crucial that a platform business is able to create great value units in the eyes of their users to sustain growth. FALSE
- Platforms only provide the floor for the value units. They are created by the producers on the platform.
The participants in each platform business can be clearly divided into two distinct groups: producers and consumers. FALSE
- Producers and consumers are not necessarily distinct for each platform business. It is possible, that producers are also consumers (e.g., YouTube users may upload videos and also view them).
Tracking the life cycle of a platform is crucial. Which metrics make sense depends on the stage the platform is in and also the platform type. The stages can be divided into the Startup Phase, the Growth Phase, and the Maturity Phase. Many metrics stay relevant throughout all stages but are more important during certain points in the platform’s life cycle. During which stage is tracking the producer-to-consumer ratio usually most important?
Growth Phase
Equally important throughout all stages.
Maturity Phase
Startup Phase
Growth Phase
