Looking Beyond Membership: A Simulation Study of Market-entry Strategies for Two-sided Platforms under Competition

Organizations need to implement a proper market-entry strategy to successfully establish a two-sided digital platform. Following the right strategy becomes even more crucial if a competing platform already exists in the targeted market. In this case, organizations will find it more difficult to reach critical mass because users flock to the already established, larger platform due to network effects, which will result in a potential winner-take-all situation. While previous research proposes strategies, it has not discussed how to find the right strategy. This paper introduces an agent-based market simulation to comprehensively evaluate alternative strategies under competition that accounts for not only platform adoption for the entrant but also for transactions, earnings, and the need to weaken the incumbent. Through an example case parameterized with empirical data, I illustrate how one can apply the model. The findings suggest that entrants need to comprehensively evaluate market-entry strategies beyond just looking at membership figures because different strategies can have the most promise with regard to growing the entrant’s platform, weakening the incumbent, and boosting the entrant’s transactions and earnings