Platform Openness as a Strategic Parameter. Google Chrome vs. Apple Safari

List of contents

List of contents

List of figures

1 Introduction

2 Theoretical background
2.1 Two-sides markets, platform and platform openness
2.2 Ecosystem in a platform environment
2.3 Platform governance
2.4 Platform competition

3 Platform openness as a strategic parameter in practice
3.1 Classification of internet browsers as a platform
3.2 Extensions as drivers for platform openness and their disadvantages
3.3 Limitation of platform openness and their solutions

4 Conclusion

List of references

List of figures

Figure 1: Corporate Governance

Figure 2: Internet browser market share

1 Introduction

Even in the early days of the Internet and the use of browsers to access the Internet, there was a competition in the market. This competition between the browsers of Netscape (Netscape Navigator) and Microsoft (Internet Explorer) became known under the synonym "first browser war". In December 1994, the market share of Netscape Navigator 1.0 was about 80%, while the share of Internet Explorer was 3% (Yoffie and Kwak 2001). In November 1997, Microsoft's share was already 39%, while Netscaper's share dropped to 53% (Yoffie and Kwak 2001).

Microsoft emerged from the war as the clear winner. For Shapiro and Varian (1999), the victory was due on the one hand to the financial advantage that Microsoft had over Netscape, and on the other hand to the Microsoft operating system, through which Internet Explorer reached many potential customers. As a result of the browser war, Netscape made the source code for all its products publicly available in 1998 (de Vries and Oshri 2008). This was not only the birth of today's browser "Firefox", but also the birth of today's well-known open source projects in the browser market (de Vries and Oshri 2008).

The first browser war shows that in the early days of browsers, factors such as "open source" or "extensions" and the associated platform openness played only a minor role in the market environment. The following report is dedicated to platform openness as a strategic parameter using the example of Google Chrome and Apple Safari. Following this brief introduction to the topic, the second section elaborates the theoretical background of this work. This is followed in the third section by the classification of the Internet browser as a platform. In the further course, the platform openness of browsers is explained using the example of extensions and the limitations of platform openness are presented. The last section contains a conclusion.

2 Theoretical background

2.1 Two-sides markets, platform and platform openness

A two-sided market involves two agents who are in communication through a platform or intermediary. In this market construct, the decision of one of the agents has an impact on the other agent (Rysman 2009). Armstrong and Wright (2006) mention that interaction between agents creates so-called cross-group network externalities. The network externality is positive, when one agent participating a network and this participation results in an increase of the utility for all agents. The utility for all agents is decreasing, when an agent joints a network which is limited (Top, Dilek and Colakoglu 2011).

Nowadays a large amount of industries function as a two-sided market and the number of industries is growing (Armstrong and Wright 2018). Many of these two sided markets link buyers to sellers through a platform, such as credit card companies, internet portals, or real estate agencies (Armstrong and Wright 2018). Armstrong and Wright (2018) also note that in addition to the classic buyer with seller linkage, there is also a linkage between user and developer, which is often found in so-called software platforms or digital platforms (video games or computer operating systems). With reference to Eisenmann, Parker and Van Alstyne (2008), each role and thus each agent can be individually determined in the magnitude of openness (to increase participation) or closeness. For companies that create or already offer platforms, the optimal degree of openness is crucial because it can create network externalities, reduce lock-in for platform users, and increase competition among platform providers (Eisenmann, Parker and Van Alstyne 2008). With reference to Eisenmann, Parker and Van Alstyne (2008), a platform is said to be open if the use or development of the platform is possible without restrictions and if the requirements of the platform apply to all users to the same extent. Rysman (2009) defines platform openness as one of the main strategic parameter in the context of two-sided-market beside the price.

2.2 Ecosystem in a platform environment

The term "ecosystem" is taken from the language of biology and generally defines a group operating in the economy, which are interdependent (Jacobides, Cennamo, and Gawer 2018). This approach can also be found in the literature on two-sided markets, as presented in the previous chapter. Jacobides, Cennamo, and Gawer (2018) define three ecosystems. First, the "Business Ecosystem," second, the "Innovation Ecosystem," and third, the "Platform Ecosystem." In the following, the term "platform ecosystem" will be discussed in more detail due to its relevance for this paper.

Platform ecosystems include both the sponsor of the respective platform and other providers of supplements that generate added value for users of the platform (Jacobides, Cennamo, and Gawer 2018). Jacobides, Cennamo, and Gawer (2018) describe the platform ecosystem as a "hub and spoke" model in which all participants exchange information via open source technologies, APIs (application programming interfaces), or other common technical requirements. Connecting to a platform gives extension providers direct and indirect access to users of the platform. Examples of this are the connection of independent software providers who work with SAP or developers who create games for consoles. Therefore, in addition to two-sided markets, platforms are also referred to as semi-regulated markets (Jacobides, Cennamo, and Gawer 2018).

2.3 Platform governance

Abbildung in dieser Leseprobe nicht enthalten

Figure 1 Corporate Goverance: Source: Fenwick, McCahery and Vermeulen (2019)

In the course of establishing the concept of platform ecosystem, the term platform governance is becoming increasingly important. Thus, there is an ever-increasing pool of data but also users, companies, or complements to regulate (Lee, Zhu and Jeffery 2018). In order to shed light on the term "platform governance," it is important to distinguish it from the basic concept of “corporate governance”. Corporate governance describes structures and procedures within an organization that allow responsibility and control to flow from shareholders through board/management to employees. In turn, accountability flows from employees in the opposite direction. The main objective is to ensure that the interests of investors are protected (Fenwick, McCahery and Vermeulen 2019).

A hierarchical organization, as found in corporate governance, leads to a complexification of a company's culture in many companies. Nevertheless, companies rely on these very structures for growth (Fenwick, McCahery and Vermeulen 2019). Authors Fenwick, McCahery and Vermeulen (2019) noted that a tension can quickly develop between structure and culture, which as a result hinders growth. Therefore, from the authors perspective, the move towards platforms and the resulting platform governance is important. Platform governance aims to prevent abuse between the users of a platform, to monitor the community and to ensure smooth cooperation (Ciligot 2020).

The concept of platform governance has not yet been sufficiently considered in academia. Thus, only initial approaches and approaches to the topic exist in science, such as the three strategies of Fenwick, McCahery and Vermeulen (2019) or the scenarios of Kitsing and Vallistu in "Proceedings of Fifth International Congress of Information and Communication Technology" on p. 334 - 341. Due to the ever-increasing dynamics of platforms, the term "platform governance" will increasingly find its way into the literature in the coming years.

2.4 Platform competition

Platform competition takes place at different levels in the platform ecosystem. Parker and van Alstyne (2018a) distinguish between three different competitions. First of all, between platforms among themselves. This includes, for example, the game console battle between Nintendo, Sony and Microsoft. Secondly, competition can arise between a platform and an associated partner. Here, for example, Microsoft acts as a platform with its operating system, through which various innovations from partners such as browsers or messaging services are integrated. Thirdly, the two authors see competition between partners. Here the partners are focused on the same platform, for example two video game producer reaching one target group through the same platform.

Due to the high multi-homing costs, the lack of niche specialisation and the large demand and offers on platforms, the competition between platforms tends towards a "winner-take-all" principle. Especially the higher multi-homing costs force the user to choose one platform, as it is difficult to switch between two platforms (Eisenmann, Parker and Van Alstyne 2006). Platform competition is also a driver of platform openness. Each platform tries to win over many external developers in the competition, which opens it up to the outside world (Chesbrough 2003; West 2003). Competition on platforms and the resulting openness is thus also constantly related to platform governance (Parker and Van Alstyne 2018b).

3 Platform openness as a strategic parameter in practice

3.1 Classification of internet browsers as a platform

In order to discuss platform openness in browsers using Google Chrome and Apple Safari as examples in the remainder of this paper, the first step is to define whether Internet browsers can be considered platforms.

At first glance, the Internet browser, much like an operating system, appears to be a two-sided market, as it stands between an end user and a developer. However, Auer and Petit (2015) found in their paper that cross-platform externalities are less likely for Internet browsers. This is because internet browsers act between very different user groups such as end users, vendors, web developers. For web developers, the number of end users seems to be irrelevant (Auer and Petit 2015). The authors Auer and Petit (2015) focus on three reasons here. First, end users can access any website with just about any browser. Second, websites usually do not need to be optimized to run on different browsers. This results in the third reason that developers therefore do not have to commit to a browser in order to reach an end-user group.

Despite these findings, the theory of two-sided markets and the resulting notion of platform may be applicable to Internet browsers. When companies use browser technology to make money from other services, cross-platform externalities can arise. For example, Google offers its Chrome browser as a free browser in order to earn money from the end user with other Google features. (Auer and Petit 2015). Apple's Safari browser makes money by implementing the Google search engine as the default search engine. Here, the function of the browser as a two-sided market becomes clear.

Internet browsers can also be defined as two-sided markets and thus as a platform via extensions and plug-ins. For example, Google Chrome offers the Chrome Web Store, where end users can obtain extensions from developers. Until January 2020, payment was also possible via the Web Store itself, but Google closed the Payments API for developers in January 2020 and is now discontinuing it altogether. Thus, payment must be handled via third-party providers (Beiersmann 2020). This is how Google restricts platform openness. Extensions are also available via the Safari browser. In contrast to the Chrome browser, the user can only access a very small number of extensions here. The cross-platform externalities are significantly lower than in Chrome, since only a handful of developers are given the opportunity to exchange information with the end user and access is limited. The opportunities and risks of platform openness for browser extensions will be discussed in the following chapters.

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