Critical Mass in Platform Businesses
A critical mass in a network is defined as the point at which the growth of the network becomes self-sustaining.
In the context of platform businessesOpens in new window, critical mass may be required on both sides of the market and is driven by a number of variables, including the type and strength of network effectsOpens in new window, customer behaviors and the distribution of customer tastes.
While scaling a nascent platform is particularly difficult, because it often has limited network effects due to its small size, reaching critical mass makes growth and participant matching much easier.
Platforms that do not reach critical mass often unravel. In the case of direct network effects, the level of participation on the platform affects the value it offers to users.
Platforms without critical mass often struggle to match participants. For example, if a new dating site launches but does not have female participants on day one, male participants are unlikely to find a suitable match. If the platform is not able to match people—which is its raison d'être—then it unravels as early adopters leave.
Also in this series include:
- Richard L. Daft and Norman B. Macintosh, “The Nature and Use of Formal Control Systems for Management Control and Strategy Implementation,” Journal of Management 10 (1984), 43 – 66
- Laure Claire Reillier, Benoit Reillier, “Platform Strategy: How to Unlock the Power of Communities and Networks to ...”