Mobile Platforms as Two-sided Markets

Mobile platforms combine state-of-the-art mobile phones, i.e., smartphones, with innovative operating systems and so-called app stores. App stores are a special kind of search and product market. They allow consumers to search, buy and install apps for their smartphone. These apps are built for a specific operating system and provide additional functionality. App developers use the app store to promote and sell their products. Adoption by consumers and developers depends on the platform as a whole. We introduce the notion of two-sided markets to mobile platforms. Apple’s iPhone and App Store as well as Google’s Android phones and market are described as a practical example. Theories of two-sided markets are reviewed and analyzed for their applicability to the mobile platform scenario. We identify and discuss promising aspects, pitfalls and shortcomings of existing models. Open research questions are revealed. We find that Rochet and Tirole’s model of two-sided markets provides a good match. It explains some of the peculiarities observed. However, as other models, it falls short of comprehensively representing the mobile scenario. Hence, we identify what a comprehensive model needs to provide and outline extensions to existing models. Furthermore, we apply the work of Parker and Van Alstyne to motivate the strategic decisions observed in the mobile market.