Sign In

Communications of the ACM

Technology strategy and management

Data Platforms and Network Effects

colorful towers resembling data storage platforms, illustration

Credit: Andrij Borys Associates, Shutterstock

Industry platforms are foundations that bring people and organizations together for a common purpose, which usually includes making money. They function at the level of a market or ecosystem, rather than only within a specific firm. They often start with products such as operating systems and microprocessors, services such as social media and messaging systems, or marketplaces for e-commerce and financial transactions. They can link thousands, millions, or even billions of users and other market actors. But another type of industry platform has recently received attention from consultants such as The Boston Consulting Group as well as investors, entrepreneurs, and policymakers. These platforms center around data. Some have become extremely valuable. How can data inspire industry platforms and what is their potential as businesses?

A distinctive feature of industry platforms, and fundamental to their definition, is the ability to generate positive feedback loops with increasing returns for users and other market participants.4 We call these feedback loops "network effects." They occur on the same-side of the market when a platform connects users directly to other users, such as with the telephone, a social media or messaging app, or any peer-to-peer exchange system. Then cross-side network effects can occur when an industry platform connects demand (for example, buyers) with supply (for example, sellers). Network effects imply the value of the platform increases, at least potentially and sometimes geometrically or exponentially, with each additional user or "complement," such as apps for a smartphone or drivers for a ride-sharing service. But, when it comes to data, who are the users and what are the demand and supply sides? And where are the network effects, if any?


No entries found

Log in to Read the Full Article

Sign In

Sign in using your ACM Web Account username and password to access premium content if you are an ACM member, Communications subscriber or Digital Library subscriber.

Need Access?

Please select one of the options below for access to premium content and features.

Create a Web Account

If you are already an ACM member, Communications subscriber, or Digital Library subscriber, please set up a web account to access premium content on this site.

Join the ACM

Become a member to take full advantage of ACM's outstanding computing information resources, networking opportunities, and other benefits.

Subscribe to Communications of the ACM Magazine

Get full access to 50+ years of CACM content and receive the print version of the magazine monthly.

Purchase the Article

Non-members can purchase this article or a copy of the magazine in which it appears.
Sign In for Full Access
» Forgot Password? » Create an ACM Web Account