But what has changed in the world to make these models apparently so much more prevalent? “Matchmakers” identifies “six turbocharging technologies” that it claims have “turbocharged the ancient matchmaker model.”  Specifically, the authors argue that the combined impact of improvements in computing power, bandwidth, networking and storage capacity have allowed the establishment of “two foundational multisided platforms” that support all the others that have rapidly emerged: Internet service providers (who provide the fixed and mobile connections among platform participants) and operating systems (which provide the common language that allow app developers to achieve mass adoption).  History aside, the heart of “Matchmakers” is an entrepreneurial playbook of sorts for “building, igniting and operating matchmakers.” The strongest part of the book is the detailed description of diverse platform business models, both new and old, some of which readers might not have even previously thought of as “matchmakers.”  For instance, South Florida’s upscale Aventura Mall is really a platform for commerce between retailers and shoppers. To succeed, the developer had to take into account land values, local demographics, nearby alternatives, which retailers and entertainment services to target and what and how to charge them, and the physical design. Similar complexity faced the founders of M-Pesa, a mobile money transfer service in Kenya that in the course of three years counted 42 percent of the adult population as registered users and transformed that economy.  The problem with many of the books about the rise of the so-called platform economy is that they are filled with an unbridled optimism about the collective attractiveness of these businesses, particularly in their digital incarnations. Sure, they argue, incumbents will be disrupted, but in their stead will be bigger, stronger competitors in winner-take-all markets.  They focus on “network effects,” which can create a virtuous circle – sometimes called a flywheel effect – as new users on one side of a platform attract more on another and vice versa. They crucial attribute of network effects businesses is that every new participant increases the value of the network to existing participants.  Alex Moazed and Nicholas L. Johnson are the consultants turned authors of “Modern Monopolies: What It Takes to Dominate the 21st Century Economy” (St. Martins). Their book promises the same “frameworks and insights we use to help our clients become modern monopolies.” In their telling, the history of “platform capitalism” appears to have started with eBay, which in part explains the inability of their “frameworks” to deliver on the assurance of market domination.  “Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work For You” (Norton), another book written by industry consultants — these mostly with day jobs in academia — provides an even more expansive vision of the “revolution” wrought by the emergence of network effects as “the Internet-era source of market power,” which “is likely to strengthen a market’s winner take all tendency.”  The book’s authors — Geoffrey Parker, Marshall W. Van Alstyne and Sangeet Paul Choudary — argue that the ascension of platform business models requires a fundamental rethinking of things as diverse as basic business strategy and government regulation. Their wide-ranging vision and predictions are undermined by frequent factual errors. For example, Sony does not own Time Warner movie and television studios, and Netflix does not have strong network effects.  Even “Matchmakers,” which offers the most balanced picture of the challenges and opportunities of multisided platforms, plays down the structural fragility faced by all of the “turbocharged” matchmakers described. Mr. Evans and Mr. Schmalensee insist that “network effects power all multisided platforms.” What’s more, according to them, the digital developments recounted “have resulted in a huge increase in the power and reach of these effects.” Neither statement is true.  First, plenty of multisided platforms do not have any significant network effects to speak of. A popular TV show attracts both viewers and advertisers, but it is the quality of the programming, not the presence of more advertisers, that keeps the audience coming back. TV and cable broadcasting networks, like most ad-based media businesses, are multisided platforms, but they have negligible network effects. Google, the mightiest exception to the digital fragility rule, is a platform business that does not benefit primarily from network effects but rather from traditional economies of scale.  Second, the strength of network effects is often a function of the existence of reinforcing competitive advantages like economies of scale and, notably, customer captivity. The digital economy has undermined both of these barriers to entry by lowering both customer switching costs and the fixed-cost base that drives scale economies.  So the Aventura Mall benefits from the long-term leases signed by retailers on the one hand and the fact that local shoppers need to go out of their way to find a comparable experience. Operators of digital malls, by contrast, rarely secure long-term commitments from either advertisers or sellers, and shoppers have multiple alternatives just a click away. And the fixed costs expended to build a traditional mall could easily fund many dozens of digital retail platforms.  Even the authors of “Modern Monopolies” concede that “a modern monopoly’s dominance” is likely to be short-lived given “the competitive threat it faces from adjacent competitors and a constant onslaught of new entrants.”  All three books provide useful, and mostly consistent, insights into how to build more resilient and valuable platforms. The diversity of businesses and outcomes described, however, suggest that the differences among platform businesses are far more important than their commonalities. This is at least good news for consumers who will benefit from multiplying innovations that reduce the annoying frictions of everyday life and the consultants who will be kept busy helping managers devise ways to prolong their increasingly tenuous perch as master of a modern monopoly.  Jonathan A. Knee is professor of professional practice at Columbia Business School and a senior adviser at Evercore Partners.
Three books explore the business models of companies that serve as multisided platforms that connect advertisers to consumers.