Caught between two stools? Four essays on value creation and value extraction on free digital platforms
Free digital platforms constitute one of the most important phenomena of modern times; they create value by bringing together customer groups that would not have interacted without digital technology or that could have done so only by incurring increased costs. In the free digital platform model, firms pay for the interaction with end consumers that use the digital platform for free. Extant research on two-sided markets has provided rich evidence for how digital platforms can attract enough members from both customer groups to enable the interaction between the customer groups. However, this research lacks insights into how free digital platforms can create value for their customer groups once these customer groups joined the platform, and extract this value for themselves. To address this substantial research gap, in this dissertation, I investigate the overall research question of how activities of free digital platforms affect the value creation for their customer groups and the ability of the platform to extract this value. In a first step, I examine this value creation and value extraction by focusing on concrete activities of free digital platforms. In Study 1, I investigate how offering firms the possibility of personalizing and positioning their search ads on search engines affects consumers’ search engine click behavior. In Study 2, I examine how adapting ad positions to consumers’ previous online shopping behavior on search engines influences consumers’ click and conversion behavior. In Study 3, I investigate the impact of a review platform’s policy of tagging reviews as written on either mobile or nonmobile devices on consumers’ perceptions of review helpfulness. In a second step, in Study 4, I generalize these findings by investigating the overall impact of such customer-oriented activities on value creation for customer groups and on the extraction of this value by free digital platforms. These four studies yield three major findings. First, free digital platforms’ activities toward one customer group always affect the value creation of the other customer group as well. Second, free digital platforms should emphasize value creation activities especially for non-paying customer groups. Third, internal, operative, and macro-environments influence the value creation and value extraction of free digital platforms. With this dissertation, I make substantial contributions to research on two-sided markets, customer orientation, search engine advertising, and online reviews. In addition, my dissertation provides numerous actionable recommendations for managers of free digital platforms and outlines promising avenues for further research.
Two-sided markets, Value creation, Free e-services, Value extraction, Digital platforms
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