Dating services, credit cards, game consoles, farmer’s markets, real estate agents all have something in common and thus the lover’s lament “he’s been too long at the fair.” Let me explain. Let me invite you to the fair.
The September ’03 issue of Review of Network Economics has an article by David S. Evans that I’m enjoying: “Some empirical Aspects of Multi-sided Platform Industries”. These “multi-sided platform industries” are a species of businesses that have particularly strong network effects.
I’ve heard it said that these business models have a butterfly shape. In an earlier paper Evans tells this story:
Dating clubs – typically bars or cafes – are an innovative way for men and women to meet each other in Japan. At one club, men and women sit on opposite sides of a glass divide. if a man sees a woman he likes, he can ask a waiter to carry a “love note” to here. Dating clubs sell patrons the prospect of making a match. Their business works only if they attract enough members of the opposite sex to their club to make a match likely. Enough men must participate to attract women, and enough women to attract the men. The club must figure out how much to charge men and women so that the club gets the right number and mix of patrons, while at the same time making money since most of these clubs are in business to turn a profit. One bar does this by charging men $100 for membership, plus $20 a visit, and letting women in for free. …
Pricing problems and startup problem make these businesses very unusual from a simple economic prospective. The paper talks about how various industries have tried to solve the problem of getting everybody to show up – what is commonly called the chicken and egg problem. The men won’t come if the women don’t, and visa-versa.
Another example is the commercial fair: flea markets, craft fairs, Comdex. IT people go to Comdex to see the vendors. The vendors go to Comdex to see the IT people. In the middle ages there were huge fairs for specific goods. For example to trade horses or clear letters of credit. Entire cities were taken over for weeks, much as Comdex used to take over Las Vagas. These fairs persisted until their industries had matured enough that other mechinisms replace them. Once a market matures the fair gets boring, vistigal. You don’t need to go to Comdex to find IBM or Microsoft.
Young industries have the fun fairs! Because then, only at the fair, can you see the newest coolest stuff Stuff you didn’t know was happening. Kick the tires. Find the interested buyers or the interesting sellers. At the fair you can start the fun collaborations.
With that in mind. Let me recomend ApacheCon. The conference of the Apache Software Foundation. Real people doing real work in new ways using really neat new stuff. Funky. No glass wall! No waiters. New opportunities!
You better register! Maybe you’ll bring home that “bunch of blue ribbon”.