Mastering the Intermediaries tops

Matering intermediaries

Matering intermediaries are ruling now

1. Exploit the Platform’s Need for Completeness

Most intermediaries wield a surprisingly simple threat: If a business doesn’t accede to their terms and fees, they will exclude it from their services. That’s powerful: Advertisers compare the prospect of disappearing from Google to a death sentence.

But not all threats of exclusion are credible. Consider the launch of the travel search engine Kayak, in 2004. From the outset Kayak told users it would offer a “comprehensive, objectivesearch” that included airlines not listed by standard online travel agencies such as Expedia and Orbitz. This approach garnered early praise for Kayak’s offering.

The new platform’s threat was obvious. If Kayak became too powerful, it could present airlines with a Hobson’s choice: pay high listing fees or watch Kayak refer passengers to competitors. But American Airlines realized that Kayak had its own vulnerability. It had promised to show users comprehensive results, and in many markets American was a dominant
force, offering the most flights on key routes such as New York to Los Angeles and New York to London. To be credible to users in those cities, Kayak had to include American flights—indeed, Kayak needed American even more than American needed Kayak—so American was able to negotiate superior terms. For example, Kayak committed to link American flights only to American’s website and not through sites like Expedia and Orbitz. (A direct link to reduced
American’s costs.) Furthermore, Kayak had to give AA flights fair prominence by objective criteria. By all indications, American didn’t pay Kayak a penny. It was a great agreement for the airline. Most other airlines agreed to pay Kayak for the users it refers and never considered requiring it to link directly to their own sites.

Real estate provides another good example of platform vulnerability. In most cities, agents have low market concentration: Sole proprietors remain viable, and midsize brokerages are widespread. One might expect a few powerful online platforms to extract high fees from real estate professionals. But platforms need to list all properties on the market; a real estate portal with incomplete listings is much less valuable to house hunters. What’s more, they
cannot simply copy listing details from other sources: Some facts may be in the public domain (such as location and size) or noncopyrightable (such as asking price and days on the market), but reproducing photos of a property is understood to require permission from the agent that is marketing that property.

As a result, real estate websites have found that they must provide agents with significant value to induce them to join. For example, Zillow not only offers property listings without charge but also prominently names the agent marketing the property. And any agent who joins can receive messages directly from interested viewers. One can imagine Zillow’s charging hundreds of dollars per listing for these services (and some agents might be willing to pay).But given the platform’s need for completeness, the agents have the upper hand.