Team 41 – Technology of the week: Waze & LEGO Ideas
Nowadays, platform-mediated network is of importance and interest. As noted by Eisenmann (2011), “ranked by market value, 60 of the world’s 100 largest corporations earn at least half of their revenue from platform markets”. Now let’s have a look at two examples of platform-mediated networks: Waze & LEGO Ideas.
Waze is a free community-driven GPS application, which has been founded in 2008 by an Israeli company and working under almost every operating system. Waze has nevertheless been bought by Google in 2013. As it is community-driven, every user can update information such as route details, travel times, speed traps, etc. on the network and they can report navigation and/or mapping errors as well. Users can also synchronize with their Facebook account and add friends to share their positions, travel routes and arriving time. Waze incentivizes the members of its community to be active by gaming experience, e.g. earning points. Waze makes money by its location-based platform Waze Ads. Companies pay to be added on the map and the users’ search results. Users would see advertising for products available in the region. However in order to maintain quality of the application, Waze decided to limit the number of advertising within a certain radius. Only the firms with the highest willingness to pay will appear on the map and the firm will only pay advertisement fees if the advertising is displayed on the map.
LEGO Ideas is a platform-mediated network that allows LEGO fans to be involved in the development of new product ideas. LEGO Ideas users submit their ideas on the platform and the LEGO Ideas team publishes the ones meeting the basic requirements. Then other users could decide whether they would support or not. When a project gets 10,000 votes within two years, it will be evaluated by the LEGO review board. If review board gives a “go” to the project, LEGO will optimize and produce the model and finally the creation will be sold around the world. The user who submitted the project will be rewarded by getting the royalties of the particular project.
Waze and LEGO Ideas are both one-sided platform-mediated network because their users are homogenous. Waze users can not only use the application as the demand-side users but they also play the supply roles by upgrading and improving the quality of the application. Lego user can freely participate in the development of a project and therefore being part of the supply side and at the same time, they can vote for the projects they like as the demand-side users. Regarding the four roles of the network, they are open to supply-side and demand-side users because they don’t have discriminatory restrictions on the participants. However, as they are the only platform providers and sponsors, they are closed in these roles.
Waze and LEGO Ideas have the strength that they don’t need to involve largely in the interaction; however, their success heavily depend on the large amount of users and their participation. The more active the community is, the more useful the platform is. Hence, the incentive strategy is a challenge for both company to maintain and grow their businesses. Moreover, they both face the threat of copying by competitors as well as the lack of revenue. In spite of these challenges, Waze is expected to have a bright future as the first mover in the market while LEGO Ideas needs to consider their IP and 3D printing challenge.
- Eisenmann, T., Parker, G. & Alstyne, M. Van, 2006. Strategies for two-sided markets. Harvard business review, pp.92–101.
- Eisenmann, T., Parker, G., and Van Alstyne, M.W. 2009. Opening Platforms: How, When and Why? in Platforms, Markets and Innovation, Gawer, A. (ed.), Northampton, MA: Edward Elgar, pp. 131-162.
- Eisenmann, T., Parker, G.G. & Van Alstyne, M.W., 2011. PLATFORM ENVELOPMENT. Strategic Management Journal, 32, pp.1270–1285.
- Lego Ideas, retrieved at https://ideas.lego.com/ on 1 October, 2015
- Waze, retrieved at https://www.waze.com on 5 October, 2015