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Innovative Online Platforms: Research Opportunities

Article in Manufacturing & Service Operations Management · August 2019

DOI: 10.1287/msom.2018.0757

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 Innovative Online Platforms: Research Opportunities

Ying-Ju Chen, Hong Kong University of Science and Technology

Tinglong Dai, Johns Hopkins University
C. Gizem Korpeoglu, University College London
Ersin Körpeoğlu, University College London
Ozge Sahin, Johns Hopkins University
Christopher S. Tang, 1 University of California, Los Angeles
Shihong Xiao, Hong Kong University of Science and Technology

September 24, 2018

Economic growth in many countries is increasingly driven by successful startups that operate as online
platforms. These success stories have motivated us to define and classify various online platforms according
to their business models. This study discusses strategic and operational issues arising from five types of online
platforms (resource sharing, matching, crowdsourcing, review, and crowdfunding) and presents some
research opportunities for operations management scholars to explore.

Keywords: Online platforms, innovative operations, operations management.

1
Corresponding author. Email: [Link]@[Link].
The authors are thankful to the guest editors, Professors Saif Benjaafar and Ming Hu, two anonymous
reviewers, and Daniel Freund for their constructive comments on earlier versions.
1. Introduction
To understand the impact of online platforms on today’s global economy, one needs to look no further than
the Wall Street Journal list of the ten most valuable venture-backed private companies. As of July 2018, seven
of them, including Uber ($72 billion), Didi-Chuxing ($56 billion), Airbnb ($31 billion), Meituan-Dianping
($30 billion), WeWork ($20.2 billion), Lufax ($18.5 billion), and Lyft ($15.1 billion), 2 are online platforms.
Each of these platforms creates value for two or more independent user groups by facilitating transactions or
relationships between them. Uber, Didi-Chuxing and Lyft connect drivers and passengers; Airbnb and
WeWork connect property owners and renters for residential homes and commercial offices, respectively;
Meituan-Dianping connects merchants (e.g., restaurants) and customers by combining the Groupon model of
discounts and the Yelp model of consumer reviews; and Lufax connects capital seekers and capital providers.
The European Commission (2015) reported that between 2001 and 2011, online platforms accounted for
55% of GDP growth in the U.S. and 30% of GDP growth in the EU. PwC projects that platforms will
generate $335 billion in revenues worldwide by 2025 (FTC, 2016).

Amid their strong growth prospects, online platforms are controversial because they disrupt traditional
businesses: Uber disrupts taxis, Airbnb disrupts hotels and Alipay (an online payment system) disrupts
debit/credit cards. Also, the underlying innovative business models of different platforms are often at odds
with existing policies and regulations. For example, labor lawyers have argued that Uber drivers should be
treated as employees instead of contractors, and consumer activist groups have expressed concerns over
Uber’s safety and privacy issues. Governments around the world are struggling to review their outdated legal
frameworks to regulate various online platforms.

Online platforms have generated excitement in the public domain. As of August 2018, a Google search using
keywords “online platforms” or “online platform” returned over 21 million webpages. While some
established literature deals with e-commerce platforms and platforms for the distribution of information
goods (e.g., Geoffrion and Krishnan, 2003), limited published research exists on “many-to-many” online
platforms and on online platforms that involve exchange of physical goods, labor or capital. Specifically,
using keywords “online platforms” to search on the Web of Science found 721 research articles that were
published between 2000 and 2017, and nearly half of them (329 articles) were published in 2017 (see Figure
1). 3 Therefore, a great opportunity exists for the operations management (OM) research community to
examine strategic and operational issues arising from various online platforms.

2
Source: [Link]
3
The first two research articles (Bolton et al., 2005; Michail et al., 2005) that used the term “online platforms” were
published as book chapters. The former used lab experiments to examine the implications of “online reputation” for

2
Motivated by these observations, this study explored three main questions: (1) What is an online platform?
How should one classify online platforms? (2) How do online platforms create and capture value? (3) What
are the OM research opportunities arising from various types of online platforms?

Figure 1. Number of academic publications with keywords “online platforms” in titles or abstracts.
The rest of this paper is organized as follows. Section 2 defines and classifies platforms. Section 3 discusses
value created and captured by platforms. Section 4 presents potential research opportunities for OM
scholars. 4 Section 5 summarizes the study conclusions.

2. Online Platforms: Definition and Classification

The European Commission (2016) defines online platforms as digital marketplaces that “enable individuals or
small entities as buyers and sellers to “transact” (i.e., search and match) effectively and efficiently by employing various internet-
connected digital communication devices.” Online platforms share key characteristics including 1) the use of
information and communication technologies to facilitate transactions between user groups; 2) collection and
use of data about these transactions; and 3) network effects that make the use of platforms with most users
most valuable to other users. Examples include e-commerce platforms (e.g., Alibaba, Apple App Store), travel
websites (e.g., Expedia), crowdsourcing platforms (e.g., InnoCentive), and crowdfunding platforms (e.g.,
Kickstarter). Figure 2 illustrates this definition of an online platform. In addition, the platform specifies
“rules of engagement” (e.g., types of information, pricing formats, ratings, search process, etc.) for users to
search, interact, and match with each other.

suppliers and buyers to transact over an e-commerce platform, whereas the latter discussed how Egyptian minority
groups use online social media platforms for expressing their thoughts freely.
4
Because the intent is to encourage OM researchers to explore this important area, this study does not provide an
exhaustive review of related literature and we apologize for any unintended omissions.

3
 Online Platform

User Group 1 (e.g., drivers, Rules of engagement User Group 2 (e.g., passengers,
lenders, landlords, sellers) borrowers, renters, buyers)

Figure 2. Interactions between an online platform and business or consumer user groups.
Since a universally accepted classification scheme for online platforms does not exist, one may take a “buyer-
seller perspective” to classify online platforms according to the type of transactions (e.g., service (a ride),
capital (a loan), information (a review), etc.) between buyers and sellers. Alternatively, one may take a
“platform perspective” by focusing on what the platform aims to facilitate (e.g., resource-sharing, matching,
crowdsourcing, reviews, crowdfunding). This study adopts the second approach to classify online platforms
because it enables one to map these facilitations to business models (i.e., activities to create value for buyers
and sellers, and activities for the platform to capture value (Chesbrough, 2007)). Due to page limitations, we
focus on resource sharing, matching, crowdsourcing, review, and crowdfunding platforms as shown in Table 1. 5
(Further discussions of e-commerce and peer-to-peer lending platforms can be found in Appendices A and B,
respectively.) In addition, we focus on “virtual” online platforms that “do not own inventory of physical goods or
contents.” 6

Table 1. Classification of online platforms according to business models and user groups.
Business Model \ Business to Business Business to Consumer Consumer to Consumer
User Group (B2B) (B2C) (C2C)
Resource Sharing WeWork 7 Uber Eats, Deliveroo 8, [Link], Uber, Didi-Chuxing,
Airbnb, Yard Club, Udemy 9

5
In addition to these five types of platforms, online gaming platforms are also growing. Graham (2017) reports that the
annual revenue of online gaming platforms (e.g., Steam, Xbox Live Marketplace, PlayStation Store) has exceeded USD
$100 billion.
6
For example, Amazon is not an online platform overall because Amazon owns inventory of its merchandise. However,
Amazon Marketplace is an online platform because it enables third-party sellers to sell their products to consumers by
piggybacking on the Amazon website. Similarly, the bike sharing platform OfO in China is not an online platform
because it owns its fleet; however, Uber is an online platform because it does not own cars.
7
WeWork is a B2B platform because it offers shared office spaces for small businesses and entrepreneurs to conduct
business activities.
8
Deliveroo, [Link] and Uber Eats are online platforms that coordinate self-employed delivery persons to deliver food
from restaurants to their customers using bicycles, motorcycles or cars. These platforms engage three groups of users:
restaurants, freelance couriers and eaters.
9
Udemy is an online education platform that enables instructors to post their online courses for free, but instructors
share a portion of the revenue collected from online students. Udemy has over 15 million students and more than
20,000 instructors offering more than 55,000 online courses.

4
 Matching Upwork (formerly known Monster, CareerBuilder, e-Harmony, Match,
as Elance) LinkedIn (a recruitment TaskRabbit, Tinder,
platform) Instagram 10
Crowdsourcing InnoCentive, 11 Kaggle, LiveOps 12
Topcoder, NineSigma
Review Kelly Blue Book, Shopzilla, Yelp, Rotten Tomatoes,
[Link] TripAdvisor, Angie’s List,
Meituan-Dianping
Crowdfunding 13 Kickstarter, Indiegogo LendingClub, Prosper

Without owning assets, virtual online platforms (Table 1) are essentially “intermediaries” that connect
different user groups. What follows are illustrative examples for the five types of platforms. 1) Uber is a
resource sharing platform that coordinates passengers and drivers for rides by leveraging real-time location
information of both user groups. 2) e-Harmony is a matching platform that matches its male and female
members for dating by using members’ personal information and preferences. 3) InnoCentive is a
crowdsourcing platform that enables many solvers to compete for developing the best solution to a problem
posted by a seeker. 4) Yelp is a review platform that allows numerous users to post their reviews and share
their experiences about various merchants. 5) Kickstarter is a crowdfunding platform that enables a seeker to
raise funds from a large number of providers to support a project.

3. Value Creation and Value Capture

This section discusses how platforms create and capture value. Section 3.1 analyzes value creation and capture
by various platforms, and Section 3.2 highlights the various success and risk factors of these platforms.
3.1. Value Created and Captured by Online Platforms
As an intermediary, a platform’s success hinges on the value it creates for user groups. Wu (2004)
summarized informational and transactional values created by intermediaries. The first value reduces
information asymmetries between user groups and the second value reduces the costs of searching and
matching. Belavina and Girotra (2012) articulated an additional value: an intermediary can reduce the matching

10
Safronova (2017) reports that Instagram is now a dating platform. By using its Instagram Stories (a collage of photos,
memos, comments, etc.), users can create their own online persona for potential matching.
11
InnoCentive is a crowdsourcing platform that can be categorized as B2B or B2C because it contains a large number
of solvers who can be considered as consumers; yet, these solvers also seek income in the form of awards.
12
LiveOps is an online service platform that connects freelancer call center agents with consumers. Their business
model is categorized as crowdsourcing because a large number of call center agents are compensated based on their
relative rank of service quality. See Stouras et al. (2014) for details.
13
Reward-based crowdfunding (B2C) platforms such as Kickstarter are discussed in Section 4.5); the discussion of peer-
to-peer lending (C2C) platforms is found in Appendix B.

5
friction between buyers and sellers to meet buyers’ changing needs and sellers’ changing preferences. Table 2
illustrates these different values by platforms and user groups.
Table 2. Value created by different online platforms for different user groups.
Business Model/
Value Creation Value Created for Businesses Value Created for Consumers
Resource Sharing Reduce operating costs (e.g., WeWork). On-demand matching of supply and
demand (e.g., Uber); monetize under-
utilized resources (e.g., Uber and Airbnb).
Matching Reduce search costs for finding a large Decrease search, signaling and
number of job applicants (e.g., Monster) or communication costs for finding partners
freelancers (e.g., Upwork). (e.g., e-Harmony) or jobs (e.g., Monster).
Crowdsourcing Reduce search costs for finding a large More income-generating opportunities with
number of solvers outside the firm; elicit easy access; opportunities to develop and
innovative solutions to challenging problems improve skills and reputation (e.g.,
at low cost (e.g., InnoCentive). Topcoder).
Review Attract more potential customers with better Reduce search costs for finding quality
reviews (e.g., Yelp). products/services (e.g., Yelp).
Crowdfunding Reduce search cost and demand uncertainty Reduce search cost for providers to fund
for seekers (e.g., Kickstarter). projects that match their interest (e.g.,
Kickstarter).

In addition to what Table 2 highlights, “network effects” generate a positive feedback loop in which a
platform creates more values with more users. 14 For example, as more recruiters post their job openings on
Monster, more job seekers will post their resumes. Hence, Monster creates more value when the market size
becomes bigger. 15 Online platforms can also improve social welfare. Arnold and Hildebrandt (2017) stated
that ride-sharing platforms such as Uber can reduce carbon dioxide emissions. Moreover, online platforms
such as Etsy create new jobs for low-income women (House of Lords, 2016). 16

In return for value created, an online platform can capture value (i.e., generate revenue from user groups
and/or online advertisements) as summarized in Table 3.
Table 3. Value captured by different online platforms from different user groups.
Business Model/
Value Capture Value Captured from Businesses Value Captured from Consumers
Resource Sharing Providers pay commission fees (e.g., Uber Consumers pay for the service and some other
used to charge its drivers 25% of the price processing fees, but the use of the platform is
paid by each passenger). free of charge.

14
Social media platforms exhibit strong network effects that propel the exponential growth in terms of the number of
users (Cusumano, 2011). For example, within 6 years, WeChat reached almost 1 billion users (Lucas, 2017).
15
However, Li and Netessine (2018) discovered that this “positive” network effect may not be true when the user
groups are heterogeneous and when searching and matching processes are either time-constrained or time-sensitive;
respectively.
16
However, Benjaafar et al. (2018b) find that by attracting more workers to participate in on-demand platforms that
provide time-sensitive services, labor welfare is non-monotonic: it first increases in the labor pool size and then
decreases.

6
 Matching Business organizations pay some service Ranges from fully free platforms to one that
fees for job postings. charges subscription and add-on service fees
(e.g., review of resumes for job seekers). Paid
memberships for C2C models (e.g., e-
Harmony).
Crowdsourcing Seekers pay service fees or commissions Usually free for solvers.
(e.g., InnoCentive charges seekers fees for
posting problems or commissions based
on the awards given to solvers).
Review Advertising from businesses (e.g., hotel Free for consumers, but some platforms (e.g.,
ads on TripAdvisor). Yelp) reward consumers who post many
reviews.
Crowdfunding Seekers pay commissions (e.g., Kickstarter Usually free for providers.
keeps 5% of funds raised in each
successful campaign).

3.2. Success and Risk Factors of Online Platforms

As platforms create and capture value, Parker et al. (2016) stated that, by leveraging the capability of digital
technologies, platforms have the following competitive advantages over traditional businesses:
1) Low development costs. Because online platforms do not own inventories or contents, the main
cost is to develop the platform itself and attract users from both sides to participate.
2) Low to medium costs of user acquisition and retention. Because online platforms are relatively new,
competition among them is less fierce. As such, the costs of user acquisition and retention are
relatively moderate. In particular, many online platforms provide free services for consumers even
though they charge businesses service fees.
3) Multi-sided revenue streams. Because online platforms create value for both user groups, they can
potentially generate revenue from each user group and from online advertisements.
4) Ease of scalability. Because online platforms are light in assets, they can easily scale up their
operations both locally and globally.
5) Wide accessibility. As more user groups gain access to the Internet and mobile technologies, more
user groups can gain access to the services provided by online platforms. This is particularly pertinent
to the China market that has over 600 million smartphone users.

Behind successful online platforms that leverage the previous success factors, there are myriad failures. Van
Alstyne et al. (2016) highlighted several key reasons why online platforms fail. First, platforms may fail to
optimize “openness.” For example, Apple’s market penetration was in single digits until Apple opened its iOS
platforms to app developers. Second, platforms may fail to launch the “right side” of the market. For example,
Google launched Google Health for consumers to consolidate their health information, but it failed because
it was focusing on consumers without getting support from physicians and insurers. Without the support

7
from providers, consumers do not find strong reasons to use Google Health. Third, platforms may fail to put
critical mass ahead of money. For example, eBay developed Billpoint: a digital payment system that can prevent
fraudulent transactions. Whereas Billpoint charged transaction fees, PayPal offered financial incentive to
encourage existing users who refer new users to sign up. Within a short period of time, PayPal became the
preferred payment system for eBay, and eBay phased out Billpoint and acquired PayPal eventually.
Conceptually speaking, many platforms can fail due to the following three major risk factors:
1) Poor value creation. Van Alstyne et al. (2016) articulated that platforms failed because they have not
created the “right” value for the “right” user group. For example, Covisint, an online platform that
matches major automakers (e.g., Daimler-Chrysler, Ford, GM) with smaller auto-parts suppliers,
failed because the platform created little value for participating suppliers when many suppliers had to
compete for orders from a few automakers. As only a few suppliers participated, Covisint ended its
operations in 2004. Also, Tang (2012) argued that Groupon creates great value to customers, but not
to merchants: many merchants complain about not being able to “translate” Groupon sales based on
deep discount into repeat customers paying the regular retail price. As Groupon continues to incur
extra costs to recruit and retain merchants, it was rarely profitable 17 and its stock price fell from its
IPO price $28 in 2011 to $5 in August 2018.
2) Search and matching frictions. Growing the market size is believed to be critical for online platforms
(see Kabra et al. (2017) for a study of ride-hailing platforms). However, this belief may not be true
because the search and matching costs for some platforms can increase as the size of different user
groups increases. To elaborate, consider the empirical study of an online peer-to-peer holiday
property rental platform conducted by Li and Netessine (2018). They found that as the number of
participants on each side increases, search frictions can cause the number and the quality of resulting
matches to reduce. 18 Specifically, they found that doubling the size of travelers and hosts can create
extra search costs: the number of inquiries sent by travelers increased by 18.3%, and the number of
inquiries received by hosts increased by 19.6%. Also, it can create extra matching frictions: the
number of traveler confirmations reduced by 15.4%, and the host occupancy rate reduced by 15.9%.
Thus, the platform lost 5.6% of potential matches because of the increased search frictions caused by
the increased market size.
3) Low switching costs. As more platforms enter the market and as competition among platforms
intensifies, user groups may become disloyal due to low switching costs. Consider the Thingiverse
platform that allows users to share or sell product design files to be printed on its MakerBot 3-D

17
Despite its $3 billion annual revenue since 2013, Groupon’s earnings before interest and tax has been negative until
2017.
18
Li and Netessine (2018) show, consistent with earlier findings, that more product choices can lead to lower sales due
to “choice fatigue” (e.g., Kuksov and Villas-Boas, 2010).

8
 printers. However, because MakerBot printers are based on open-source designs, the product design
files are based on industry standard file formats so that users can download design files and print the
products on competitor’s 3-D printers. Consequently, Thingiverse has limited growth because the
company failed to develop proprietary design specs so that similar platforms (e.g., Pinshape,
GrabCad, MyMiniFactory, Autodesk123D) can enter the market and disloyal users can share or sell
their product design files on different platforms (Zhu and Furr, 2016). In the same vein, user groups
can become disloyal because various ride-hailing platforms (e.g., Uber and Lyft) offer similar services
and the switching costs between platforms for drivers and passengers are low (Bai and Tang, 2018).

4. Research Questions
Some operations management (OM) research questions, summarized in Table 4, are intended to mitigate the
three major risk factors in the last section that can hinder the success of online platforms. These questions
can be examined through a variety of methodologies, including analytical modeling, behavioral experiments,
empirical analysis and field experiments. Before discussing each OM research question in more detail, this
section contains a brief review of the applicable literature. Except for the review platform, these questions are
discussed by considering a specific context.

Table 4. OM research questions motivated by five types of online platforms.

Platform Type (Context) Operations Management Research Questions

Resource Sharing (Ride 1. Adequate value creation: Can a sharing platform create more value by
Sharing) giving price-setting power to users?
2. Reducing frictions and uncertainty: How can a sharing platform reduce
supply-demand imbalance and regulatory uncertainty?
3. Sustaining user groups: How can a sharing platform mitigate the effect of
multi-homing by boosting user loyalty?

Matching (Online Dating) 1. Adequate value creation: How should a matching platform design its
communication mechanisms between users?
2. Reducing frictions and uncertainty: How should a matching platform
design its recommendation mechanism to reduce search friction?
3. Sustaining user groups: How should a matching platform design its
pricing strategy to maintain a diverse user base?

9
 Crowdsourcing (Innovation 1. Adequate value creation: How to create value to both solvers and seekers
Contests) by balancing “audacity and achievability”?
2. Reducing frictions and uncertainty: How to design rules of engagement to
reduce search friction?
3. Sustaining user groups: What is the impact of information design on user
satisfaction?

Reviews 1. Adequate value creation: How does the design of a review platform
facilitate continuous feedback about business operations and consumer
preferences?
2. Reducing frictions and uncertainty: What are the tradeoffs behind a review
platform’s choice of the accessibility of its reviews?
3. Sustaining user groups: How to fight fake reviews in an effective and
sustainable manner to cultivate user loyalty?

Crowdfunding (Reward- 1. Adequate value creation: How does platform design (e.g., information
Based) disclosure policy) affect user interactions and hence value creation?
2. Reducing frictions and uncertainty: How to leverage artificial intelligence
(e.g., blockchains) to reduce outcome uncertainty and increase allocation
efficiency?
3. Sustaining user groups: How to boost user loyalty by softening inter-
seeker competition?

4.1. Resource Sharing

The emerging culture of the sharing economy, along with the rapidly evolving mobile technology, has given
rise to numerous online C2C platforms where consumers can now monetize their under-utilized resources by
sharing them with other users (Economist, 2013). Some existing virtual platforms facilitate the sharing of
residences (Airbnb), cars (Uber, Lyft, and Didi-Chuxing) 19, boats (Boatbound), furniture (Furnishare) and
equipment (Yard Club). In the context of collaborative product sharing, Benjaafar et al. (2018b) showed that
product ownership and usage would be higher when the product cost is higher.

With the advent of real-time geographic location information about providers and users, the search cost to
locate providers and users is low. However, the matching frictions can be high, especially when each on-
demand transaction involves two entities who are unfamiliar with each other. To reduce this friction, many
sharing platforms develop mechanisms to 1) foster trust by using a bilateral rating system that serves as
“proxies” about the quality of both parties; and 2) enhance payment security by charging a user’s pre-

19
Here, we consider Uber, Lyft and Didi-Chuxing as resource sharing platform in the sense that the
platform does not own physical goods, and the drivers “share” their cars with passengers.

10
registered credit card and by allowing users to challenge the payment due to unsatisfactory services. In the
first example, after each transaction (ride or stay), a user (passenger or guest) and a provider (driver or host)
rate each other; and in the second example, when the host failed to deliver certain promises. While these
measures can reduce search and matching frictions, the following questions are intended to provide “right”
value to right user groups, to reduce search and matching frictions further, and to cultivate loyalty from both
user groups.
1. Can a sharing platform create more value by giving price-setting power to users? In recent
years, researchers and practitioners have recognized the importance of having online platforms to
attract the “right” type of users (Veiga et al., 2017). One way to influence user entry is through the
design of pricing mechanisms, which includes the decision regarding the price-setting entity. When
Airbnb charges a commission, it is the provider (property owner) who sets the price (i.e., rent). The
provider has superior information about the quality of the product (room or apartment) and can
assess the value better than a central planner. Li et al. (2015) also showed empirically that
“professional” owners earn more as they may get better in assessing the value of their property to
others in addition to their own knowledge about quality. However, it is the platform (Uber) who sets
the price and the commission fee. By comparison, HKTaxi, a taxi-hailing app, enables passengers in
Hong Kong to bid for taxi rides. In view of the on-demand nature and the heterogeneity of both
user groups, it is unclear which price-setting mechanism is most effective.

2. How can a sharing platform reduce supply-demand imbalance and regulatory uncertainty?
In addition to the ways to reduce search friction, when demand exceeds supply during peak hours,
ride-hailing platforms (such as Uber and Lyft) adopt surge pricing to reduce matching friction by
serving passengers with higher willingness to pay and by encouraging more drivers to participate
during rush hours. In a monopoly setting, Cachon et al. (2017) found that surge pricing can
outperform static pricing. Riquelme et al. (2015) characterized a small performance gap between
static and surge pricing in an asymptotic regime. Chen and Hu (2018) found that in the presence of
forward-­looking drivers and riders, static pricing can deter strategic behavior and achieve asymptotic
optimality. In a competitive environment, Wang and Hu (2014) found static pricing can sustain in
equilibrium because, relative to contingent pricing, it helps soften competition. Tang and Yoo (2018)
showed that a platform should not surge unless it has a competitive advantage over its competitor.
However, when both user groups are heterogeneous and time-sensitive, it is not immediately clear if
surge pricing is a dominant competitive strategy. For example, to compete with Uber in London,
Kabbee does not adopt surge pricing (Field, 2017). In the OM literature, the conditions under which
a sharing platform should adopt surge pricing and how surge pricing affects supply-demand

11
 imbalance deserve further examination.

A notable source of uncertainty surrounding resource-sharing platforms arises when they interact
with regulators. Because a resource-sharing platform often serves a sector of public interest (e.g.
transportation and housing), it must be keenly aware of the externality of its service offerings (e.g.,
increased congestion in major cities due to ride-hailing services). It is of interest for OM scholars to
examine the interactions between platforms and regulators and to examine, from a regulator’s
perspective, the optimal quantity of resources allowed for sharing on such platforms. Yu et al.
(2017) presented a multi-stakeholder model to examine the implications of the 2017 policy for
regulating on-demand ride services in China. They showed that the Chinese government policy can
result in the reduction of the number of ride-hailing service cars on the road. In 2018, the New York
City (NYC) council voted to temporarily cap the total number of Uber or Lyft car licenses operating
within the city. Clearly, the optimal cap depends on the competing objectives associated with
different stakeholders (Yu et al., 2017, Badger et al., 2018). Hence, this new policy in NYC raises
some new research questions: Should the total number of taxi licenses (including those for Uber and
Lyft cars) 20 be capped? Should the number of “actively participating” Uber drivers be capped at all
times or only during rush hours?

3. How can a sharing platform mitigate the effect of multi-homing by boosting user loyalty?
Because a sharing platform does not own or have direct control over resources (e.g., cars as assets or
drivers as employees), independent providers may “multi-home”. Also, due to low switching costs
across platforms, customers are not loyal either. Since customers are sensitive to delay, they would
choose whichever service satisfies their needs sooner. To stabilize supply and demand and to soften
competition among different platforms, it is of interest to examine ways for a platform to cultivate
loyal providers and customers. In this context, Chen and Sheldon (2015) showed empirically that
surge pricing can induce independent drivers to work for longer hours. Scheiber (2017) reported that
by alerting drivers that they are close to hitting certain earning targets, platforms can “nudge” some
drivers to work for longer periods. The literature motivates additional research issues for further
examination. For instance, it is interesting to note that Uber and Lyft now offer extra bonuses to
drivers if the number of rides they provide over a week exceeds a certain threshold. This strategy
increases switching cost for drivers so that they become more loyal to one of the platforms. To
make customers more loyal, Kabbee, a UK-based ride-sharing service company that competes with

20
Unlike most of places in the world, to be able to drive for Uber or Lyft in New York City, one needs to get a Taxi and
Limousine Commission (TLC) driver license, which is the same license required for a taxi driver.

12
 Uber, has launched a customer loyalty program called Kabbee Treats. In the same vein, Uber offers
city passes that allows user to take unlimited rides in a given period of time in certain markets. It is
of interest to examine the implications of these loyalty programs in the context of online platforms.

In addition to these three questions, it is also important to examine resource sharing platforms from
a provider’s perspective and understand their impacts on social welfare (that includes consumer
welfare), particularly when customers are delay-sensitive. Benjaafar et al. (2018a) found that as
platforms increase the labor supply (e.g., the number of Uber drivers), labor welfare can increase or
decrease, depending on customers’ sensitivity to delay and other factors. Taylor (2018) discussed
how customers’ sensitivity to delay may impact the pricing and wage decisions for a service platform.
Taylor found that delay sensitivity may increase price and decrease the optimal wage under certain
conditions of customer valuation uncertainty and agent opportunity cost uncertainty. In terms of
traffic congestion, Benjaafar et al. (2017) examined how different ride-sharing models (business-to-
consumer-B2C and consumer-to-consumer-C2C) affect traffic congestion. They found that revenue
maximizing platforms that prefer fewer seats being occupied would create high traffic congestion. By
examining an ecosystem comprising consumers, taxi drivers, platform drivers, etc., Yu et al. (2017)
found that a carefully designed regulatory policy can strike a balance among competing objectives
associated with different stakeholders.

4.2. Matching
An online matching platform is a marketplace that brings together users who search for, interact with and
establish personal (e.g., dating platforms such as e-Harmony and Match) or business (e.g., recruitment
platforms such as Monster and CareerBuilder) relationships with each other. Compared to other types of
platforms, online matching platforms are more involved because the user groups need to establish some form
of relationships (e.g., communication, discussions, interviews, tests) before any matching can take place. In
addition, each user not only has to choose another user, but also has to be chosen. For this reason, the design
of matching platforms often follows reasoning drastically different from the design of other types of
platforms (Wright, 2004).

Relative to a traditional format, an online interface helps remove physical limitations such as geography,
presence, time and scale. As noted in Section 3.3, accessibility and scalability have enabled matching platforms
to thrive in the online marketplace. For example, the Pew Research Center reports that 15% of adults in the
U.S. used online dating sites in 2016. Also, the online dating industry is worth USD $2 billion in the U.S. and
USD $1.6 billion in China. To capture the economic value, most online matching platforms adopt a

13
subscription-based model that charges users fees for access or an advertising-based model that offers the service for
free. 21 However, job search platforms (Monster and CareerBuilder) charge recruiters on a “pay as you go”
basis, but offer services for free to job seekers.

The limited and yet fast-expanding literature on online matching platforms has touched upon several aspects.
For example, Allon et al. (2017) examined whether an online matching platform (e.g., Upwork) can capture
value by using different tests to certify that service providers’ skills (e.g., app or web programming) are above
certain thresholds. Also, there is a need to understand the risks and costs that are unique to online matching
platforms such as over-communication (Kanoria and Saban, 2017), and choice overload (Schwartz, 2004;
D’Angelo and Toma, 2016). In addition, the economics literature on marriage focuses on vertical quality
differentiation across users such that each user can be of either “high type” or “low type” and their types are
observable and static (see, e.g., Becker, 1973; Burdett and Coles, 1997; Damiano and Li, 2007). It is important
to incorporate subjective, idiosyncratic and personalized user preferences, to develop recommendations systems to
improve match quality and to investigate the interaction of pricing mechanisms on user behavior, revenues
and welfare in dating and matching markets. Surrounding these issues, there are several research opportunities
for OM scholars:

1. How should a matching platform design its communication mechanisms between users to
improve value creation? Users of online matching platforms may incur high search costs due to too
many options and high matching costs due to choice overload and over-communication. Allon et al.
(2012) examined whether an online matching platform (e.g., Upwork) should provide additional job
posting and job search mechanisms to improve the matching efficiency. They found that these
mechanisms can be detrimental to the matching platform unless the platform allows providers to
communicate among themselves and exchange information on prices and job requirements. This
finding is relevant to online dating platforms as well because, due to low communication barriers and
a large user base, male users tend to “over-communicate” by sending an excessive number of low
quality messages to female users, who end up paying little attention to each message. To overcome
this challenge, Bumble (an online dating platform) only allows female users to initiate communication
(Kanoria and Saban, 2017). Future research may explore other communication mechanisms and
broaden the scope to other types of matching platforms (e.g., Monster, Upwork): Should the
platform impose fees to earn the right to initiate communications? Would such a fee improve the

21
In some cases, users are required to pay additional fees to access advanced features and options (e.g., Match’s “pay-to-
respond” model that requires free users to pay to be able to respond to paying users). Some online matching platforms
capture value by charging business users for each lead generated by the platform (e.g. Thumbtack) or for access to B2B
matching applications that facilitate business contracting opportunities (Gee, 2017).

14
 quality and the quantity of matches? Can a platform change user behavior by disclosing information
about user communication frequencies (i.e., a matching platform may display each user’s total
number of sent and received messages)? By requiring a fee for initiating communication or by
disclosing users’ communication styles, a platform may be able to create a “self-enforcing” effect,
which may improve the quality of matching.

2. How should a matching platform design its recommendation mechanism to reduce search
friction? Online matching platforms rely on algorithms to recommend potential matchings.
Halaburda et al. (2017) showed that making fewer recommendations to each user can increase both
the quantity and the quality of matches in online dating platforms. The intuition is because when
users are faced with many recommendations, they are less likely to accept a recommendation,
reducing the chance of finding a successful match. Although the literature assumes static and myopic
user preferences and behavior, future research can incorporate richer searching and matching
dynamics as well as user learning. Research along this line can help online matching platforms design
a recommendation system that considers intertemporal preferences of users, choice overload and
leaning.

3. How should an online matching platform design its pricing strategy to maintain a diverse
user base? Online matching platforms use different business models and pricing strategies to engage
their users (Rudder, 2010; Slater, 2013). Because “a large, active, and demographically interesting user
base is usually a (matching) platform's most precious asset” (Van Dijck, 2013, p. 36), managing user
composition through pricing is an interesting issue. For instance, online matching platforms can use
pricing strategies that “allow for self-selection of types” of users participating on the platforms
(Belleflamme and Peitz, 2015, p. 649). In a matching environment where user quality is highly
subjective and the value of a match is uncertain, Dai et al. (2018) showed that a matching platform
can use a “refund” mechanism to attract a diversified user base that can improve the revenues and
social welfare in the presence of “heterophilly-seeking” users.

4.3. Crowdsourcing
An online crowdsourcing platform enables a “seeker” to organize “crowdsourcing contests” so that the
seeker can elicit the best solution(s) to a problem from a large group of “solvers”. Such a platform (e.g.,
InnoCentive, Topcoder) administers contests on behalf of seekers and helps seekers to elicit solutions from a
group of highly-qualified solvers. For example, InnoCentive organizes ideation, theoretical and reduction-to-
practice contests in which a seeker can elicit innovative ideas, theoretical solutions and validated prototypes;

15
respectively. Also, some crowdsourcing platforms help seekers in determining contest rules such as an award
scheme to maximize satisfaction of both user groups. Indeed, many companies with their own in-house R&D
units, such as IBM, HP, P&G and Pfizer, are increasingly turning to crowdsourcing platforms for solutions to
various problems. According to Deloitte (2016), “85% of the top global brands have used crowdsourcing in
the last ten years; and by 2018, 75% of the world’s high performing enterprises will be using crowdsourcing.”

The OM literature on crowdsourcing contests can be divided into two streams. The first stream deals with the
rules of engagement in any (online or offline) crowdsourcing contest such as the format of the contest (i.e.,
open to all solvers or restricts entry) and the award scheme (Ales et al., 2017b). Terwiesch and Xu (2008)
showed that it is always optimal to allow free-entry open-innovation contests because the seeker can access a
diverse set of solutions. Interestingly, Boudreau et al. (2011) showed empirically and Ales et al. (2018) showed
theoretically that free entry is optimal only when the output of solvers is highly uncertain. This is because in
the presence of a large number of solvers in a contest, generally solvers put in less effort, which dominates
the diversity effect. Boudreau et al. (2016) examined empirically and Körpeoğlu and Cho (2017) examined
theoretically the impact of solver heterogeneity and showed that solvers can react differently to more intense
competition.

The second stream of literature examines the rules of engagement in the context of an online platform. For
example, Jiang et al. (2016), Bimpikis et al. (2017), Mihm and Schlapp (2017) and Wooten and Ulrich (2017)
studied whether, when and how a seeker should provide feedback to solvers. Similarly, Bockstedt et al. (2016)
characterized solvers’ entry behavior when their submissions are publicly shared with all solvers. Körpeoğlu
et al. (2018) analyzed whether the seeker should organize multiple contests and whether the seeker should
discourage solvers from working on multiple contests in parallel. Hu and Wang (2017) examined whether the
seeker should run component-wise (i.e., sequential) contests or a single comprehensive (i.e., simultaneous)
contest. Korpeoglu et al. (2018) analyzed the optimal contest duration from a seeker’s perspective. Building
on these two streams of literature, the following research questions are proposed:

1. How to create value to both solvers and seekers by balancing “audacity and achievability”?
Compared to a traditional research and development process, innovation contests create value
through attracting a heterogeneous pool of participants from diverse disciplines. Thus, keeping the
goal of a contest as general as possible helps attract solvers with diverse backgrounds. On the other
hand, overly general goals may result in either pre-existing or infeasible solutions for seekers.
Therefore, a crucial tradeoff in designing innovation contests is between “audacity and achievability”
(Zachary, 2008). Where some platforms such as InnoCentive allow seekers to post broadly defined

16
 problems with subjective evaluation criteria, other platforms such as Kaggle and Topcoder usually
run contests with well-defined problems and evaluation criteria. Broadly defined problems may lead
to a more diverse set of solutions but well-defined problems may lead to larger, more focused efforts
from solvers. Similarly, evaluating solutions based on objective criteria may reduce the uncertainty of
solvers but subjective evaluation criteria give seekers more flexibility when defining problems. Thus,
it is of interest to theoretically and empirically analyze the impact of problem specifications and the
objectivity of evaluation criteria on the outcome of a crowdsourcing contest.

2. How to design rules of engagement to reduce search frictions? As of 2018, InnoCentive has
attracted over 380,000 registered solvers, hosted more than 2,000 “external challenges” and received
more than 62,000 solutions. With such a large scale, search friction naturally arises as a key
consideration in designing innovation contests, but the issue of search friction is little explored in the
literature, which largely treats a seeker as a monopolist principal to a group of solvers without
considering the impact of competition among seekers. Yet on an online platform, seekers compete
for solvers’ attention and time. Such competition effect drives the value proposition and growth of a
platform. Thus, it is important to analyze contest-design rules such as whether to run an open
contest, and whether and how to give feedback when seekers compete for the attention of solvers.
Interviews with practitioners at InnoCentive and Topcoder revealed that these platforms either make
important design decisions (e.g., award scheme) on behalf of seekers or guide seekers about such
decisions. Therefore, it is of interest to analyze both theoretically and empirically how a platform
should guide seekers who compete for the attention of solvers. Another related question is how an
increased number of contests and members affects the welfare of solvers.

3. What is the impact of information design on user satisfaction? The importance of cultivating a
loyal user base is self-evident because the success of a crowdsourcing platform hinges on the growth
of its registered solvers and seekers, which in turn depends on the solvers’ and seekers’ expected
returns. An exciting research opportunity in this space lies in the application of the theory of
information design (see, e.g., Bergemann et al., 2018). For instance, to improve the solvers’ potential
earnings, the platform needs to decide whether to promote its registered solvers by providing data
analytics tools. These tools can help solvers understand their likelihood of winning a particular
contest and recommend contests based on their inclination and past performance, accompanied by
information as simple as the number of solvers participating in the contest, ratings and expertise. The
information made available to users has implications on the type and number of solvers attracted to
the contest. These issues can be investigated both empirically, experimentally and theoretically. It is
also useful to model the credibility of such tools and how a specific information environment

17
 interacts with agents’ strategic behavior. Therefore, it is of interest to examine whether the type of
information environment that those platforms should offer to help its users succeed and in return,
win loyalty from them.

4.4. Review
Online review platforms serve as online channels for different affinity groups of consumers to post reviews
about certain products or services and for potential consumers to make informed purchasing decisions.
Online review platforms are often specialized; for example, Yelp focuses on local business reviews and
TripAdvisor focuses on hotel, restaurant and airline reviews. Review platforms “pull” a large number of
buyers to submit their reviews (e.g., restaurant reviews on Yelp) without offering any monetary
compensation. By posting their reviews online, buyers create “altruistic” values such as promoting a firm for
providing good service, helping other consumers, feeling good when other consumers appreciate their
reviews, and punishing a firm for providing bad service (Yoo and Gretzel, 2008; Hennig-Thurau et al., 2004).
Although the reviews posted on review platforms are subjective and difficult to verify, online reviews serve as
a form of word-of-mouth that can influence consumer perception and purchasing decisions. Goldsmith and
Horowitz (2006) showed that consumers seek information from other consumers’ online reviews to reduce
their purchasing risks (high price, low quality, etc.). According to eMarketer (2016), 80.7% of 1,132 Internet
users said that online reviews are important to their online purchasing decisions. Also, Pew Research Center
(2016) reported that more than half of internet users read online reviews before making their purchasing
decisions.

There are two main streams of literature on online review platforms. The first stream examines the impact of
online reviews on sales. Luca (2011) showed that a one-star increase in Yelp rating leads to a 5.9% increase in
the revenue of an independent restaurant but not on the revenue of a chain restaurant. Yet, researchers
focusing on different industries find mixed results, and the reader is referred to Zhu and Zhang (2010) for a
comprehensive review about the impact of customer ratings on movie and book sales. The second stream
examines the issue of fake reviews. By noting that competition may induce some firms to create fake reviews
for themselves and their competitors, Luca and Zervas (2016) used fake reviews rejected by Yelp’s filtering
algorithm to identify the reasons (e.g., poor online reputation, fierce competition) for restaurants to commit
review fraud. Recognizing the presence of fake reviews, Ayeh et al. (2013), Filieri et al. (2015) and Filieri
(2016) used data collected from TripAdvisor to examine the factors that can improve the trustworthiness of
online reviews. These factors include the reputation of the platform, user experience with the platform, the
content, and the style of the reviews. Below are three sets of proposed research questions for OM scholars:

18
1. How does the design of a review platform facilitate continuous feedback about business
operations and consumer preferences? A static view of a review platform is that it creates value
to businesses and consumers by providing a sufficiently large number of views reflective of the
quality of the goods and products. Such a view does not account for dynamic interactions between
businesses and customers. Thus, an area of interest to OM scholars involves feedback mechanisms
between businesses and consumers. Businesses use customer feedback to improve their operations
on an ongoing basis, while customers gain an updated view of how product/service quality evolves
because of their reviews. Indeed, it is plausible to believe that customers’ willingness to contribute
reviews grows in the presence of a rational expectation that their effort will make a difference not
only to peers but also to business operations. With the rise of companies like HappyOrNot that
provides real time, data-driven consulting services in addition to helping collect reviews (Owen,
2018), one can expect empirical studies, field experiments, as well as analytical modeling, to be
valuable tools for conducting future research in this area.

Ways to boost the number of reviews can also be a potential research topic. Conflict of interest
arises when a firm (e.g., a restaurant) provides financial incentives to its own customers for posting
(presumably positive) reviews. Without any incentive, Dellarocas (2003) commented that voluntary
customer reviews will be under-reported because reviews are “public goods” and no incentive exists
for posting reviews or for a consumer to take the risk to try new products or services. Hennig-
Thurau et al. (2004) showed that providing economic incentives is critical for an online review
platform. Indeed, Yelp offers its loyal members (e.g., “Yelp Elite” members who provide well-
written reviews and high-quality tips for consumers) free tickets for special events and invitations to
try out new businesses. In this way, new businesses can get some ratings on Yelp and Yelp can help
them improve their service, thereby creating a virtuous cycle. On the other hand, when an online
review platform provides economic incentives for customers to post reviews, it remains unclear how
these incentives impact the trustworthiness of these reviews. It calls for both empirical and
experimental studies. Additionally, it is important to analyze whether and how the platform should
pay customers for writing reviews. In light of competition among online review platforms, it is of
interest to examine how platforms should compete for more high-quality reviews by offering
appropriate incentives.

2. What are the tradeoffs behind a review platform’s choice of the accessibility of its reviews?
To create value for heterogeneous customers, some review platforms offer different ways for
customers to search for relevant reviews. For example, TripAdvisor allows customers to search
reviews by traveler type. With simple search mechanisms, customers gain easy access to relevant

19
 information. However, it remains unclear whether this improves customer welfare and how it
influences the platform’s profit. Moreover, some platforms such as Tmall and Expedia choose not to
provide simple search mechanisms for customer search. Hence, it is of interest to examine the impact
of the provision of different search mechanisms on the value created for different user groups: under
what conditions should a platform provide which type of search mechanisms?

3. How to fight fake reviews in an effective and sustainable manner to cultivate user loyalty?
The reputation of a review platform is likely its single most important asset. When a platform is
flooded with fake reviews, users will lose their confidence in the platform and flee to its
competitors. 22 Indeed, a sizable worldwide ecosystem specializes in creating fake positive reviews
(Stevens and Emont, 2018). On the other hand, some sellers, in addition to posting fake reviews of
their own products and services, “viciously bad-mouth the competition” (Bhide, 2018). Such shady
practices, despite affecting consumer welfare and day-to-day operations of numerous businesses (and
their competitors), deserve some consideration.

Another issue of note is that reviews on some platforms are one sided in the sense that only
customers can post reviews about firms, but firms cannot post reviews about their customers or
respond to a review posted by a customer. However, a one-sided review system may give rise to
unpleasant outcomes such as customers being overly positive or negative because customers can be
biased and a one-sided review system gives more power to customers. To balance the power between
firms and customers, and to enable other customers to calibrate the credibility of reviews, it is of
interest to examine the reviewers’ behavior when the platform operates under a unilateral rating
system (e.g., Yelp) versus under a bilateral ratings system (e.g., TripAdvisor). Recent OM literature
(e.g., Jin et al. 2018) examined the effect of bilateral ratings on a resource-sharing platform (e.g., Uber).
Further research can study how user behavior under various rating systems affect the credibility of
reviews on a review platform and thus interacts with the operations of various businesses.

4.5. Crowdfunding
A crowdfunding platform enables a capital “seeker” to collect small contributions from a large number of
capital “providers” to fund a project that can range from an art project such as a music album (e.g.,
ArtistShare) to a business project such as a smartwatch startup (e.g., Kickstarter). Crowdfunding can take the
form of B2C such as charity-based (making donations), debt-based (in exchange for interest payments),

22
On a related note, reviews that reflect only extreme opinions (i.e., only extremely satisfied and unsatisfied reviews)
also negatively affect user utility, albeit in a different way.

20
equity-based (in exchange for company shares), reward-based (in exchange for future products)
crowdfunding; or in the form of C2C such as peer-to-peer (P2P) lending (in exchange for interest payments).
A seeker who runs a crowdfunding campaign decides on the funding target, the pledge price, and the type of
funding. The funding target is the level of funds necessary for the campaign to succeed, and the pledge price 23
is the level of contribution that entitles a provider to receive the product as a reward from the seeker if the
campaign becomes successful. In terms of type of funding, a seeker may run a fixed-funding or a flexible-funding
campaign. Under fixed funding, if the campaign becomes successful, the seeker gains access to contributions
and each provider receives the finished product (reward) from the seeker when it becomes available. If the
campaign fails, contributions are refunded to providers. Under flexible funding, the seeker can keep
contributions regardless of the campaign’s success 24 so contributions may not be refunded back to providers
if the campaign fails.
A crowdfunding platform runs campaigns on behalf of seekers (also called entrepreneurs or project creators)
to raise funds from providers (also called contributors or backers) by introducing seekers to a large number of
registered providers who are already interested in contributing to crowdfunding campaigns. In return, it
charges seekers certain commissions; for example, Kickstarter helped seekers raise more than USD $3.7
billion through 145,000 successful campaigns and it monetized its service by charging 5% of the funds raised
for each successful campaign (Kickstarter, 2018). At the same time, a crowdfunding platform (e.g.,
Kickstarter) reduces search costs for providers by categorizing campaigns based on subjects (e.g., film, games
and music) and based on success so far (e.g., percentage of funding target reached). Furthermore, a
crowdfunding platform (e.g., Kickstarter) reduces providers’ uncertainty by 1) keeping contributions and not
releasing them to the seeker until the campaign becomes successful because otherwise, if the campaign fails,
the seeker may not be willing to refund contributions back to providers; and 2) by requiring seekers to share a
prototype of the finished product along with other relevant information and to include an estimated delivery
date.

The OM literature on crowdfunding can be categorized into two streams: The first stream examines when a
seeker should run a crowdfunding campaign (instead of asking venture capitalists for funds) and how a seeker
should design its campaign to maximize the success probability and profit. For instance, Roma et al. (2018)
showed that a crowdfunding campaign is desirable only for a small funding target. Babich et al. (2017)
showed that when a crowdfunding campaign raises large funds, venture capitalists are discouraged to invest in

23
In many instances, a seeker may offer multiple levels of pledge prices associated with different reward
levels.
24
However, the seeker still needs to keep the promise by completing the project and pay a commission to the
platform (e.g., Indiegogo).

21
this project. Along these lines, Hu et al. (2015) showed that when providers are sufficiently heterogeneous, a
seeker should offer a menu of products instead of offering a single product. Chakraborty and Swinney (2017)
found that a seeker should signal the quality of its product by using the funding target instead of the pledge
price; Chang (2017) showed that a seeker’s profit under fixed funding is larger than that under flexible
funding.

On a more technical front, Alaei et al. (2018) provided guidelines for seekers on the design of crowdfunding
campaigns by introducing a stochastic process for the sequential arrival of providers. In addition to these
theoretical papers, empirical research has also explored issues such as product quality (Mollick, 2014), intra-
campaign updates (Du et al., 2017), and availability of contributors’ identity (Burtch et al., 2015). The second
stream focuses on the mechanism design of a crowdfunding platform. Strausz (2017) examined the
implications of the deferred payment mechanisms. Belavina et al. (2018) compared two specific mechanisms
that implement deferred payments as a way to alleviate two biggest risks providers face: the risk that seekers
keep providers’ contributions despite not delivering products and the risk that seekers misrepresent their
product features. In one mechanism, the campaign stops as soon as the funding target is reached and
providers who could not contribute to the campaign are given a chance to buy the product only after it has
been developed. In the other mechanism, the platform keeps any funds raised beyond the funding target and
releases only if the seeker successfully develops the product. In light of the literature and industry practice,
the following research questions are proposed:

1. How does platform design (e.g., information disclosure policy) impact user interactions and
value creation? To generate insights into how a crowdfunding platform improves its value creation,
it is of interest to examine how platform design impacts the interactions between its users. For
example, a platform often allows seekers to provide updates after their campaigns start. Then, an
important design-related question entails whether a seeker should strategically disclose desirable
features of its product dynamically over time especially when providers use the disclosed features to
form certain “benchmarks”. If the seeker discloses all desirable features of its product at the
beginning of the campaign, it attracts more providers early on but few later on (due to no new
features relative to the benchmark). If the seeker discloses partial information initially and then
disclose the remaining desirable features later on, it can elevate providers’ interest at different stages
of the campaign but it cannot attract too many providers initially. Therefore, it is of interest to
analyze a seeker’s optimal dynamic information disclosure policy.

2. How to leverage smart contracts (e.g., blockchains) to reduce outcome uncertainty and
increase allocation efficiency? From the provider’s perspective, the biggest risk factor of

22
 crowdfunding is uncertainty regarding the outcome of campaigns, due to the issue of moral hazard.
One way to reduce (and possibly eliminate) such uncertainty is to implement, for example, a dominant
assurance contract (Bagnoli and Lipman, 1989). Thanks to technological advances, such contracts can be
implemented by blockchain technology, which can help create a “smart contract,” using “Ether-on-a-
stick” (Blockchain at Berkeley, 2017), which partially pays out to be specified seeker if and only if the
providers (or an independent third party) vote that a promise has been delivered. This topic is an
exciting area where OM scholars can contribute to the interface between operations management
and information technology.

3. How to boost user loyalty by softening inter-seeker competition? Where the crowdfunding
literature restricts attention to a single seeker, in practice, multiple seekers compete for providers’
contributions. An important research opportunity is to examine how a platform should screen and
select campaigns by considering competition among seekers. On one hand, running too many
campaigns may lead to less exposure for each campaign and a larger dispersion of providers’
contributions, so it may reduce the success probability of each campaign. On the other hand, as the
number of campaigns increases, the number of trials for a successful campaign increases, so it may
increase the number of successful campaigns, and hence may increase platform commissions.
Similarly, a platform should select the right assortment of campaigns to maximize the contributions
and success of campaigns. It is not clear how different assortments of campaigns interact with each
other and providers’ attention. Thus, it is of interest to examine whether and how a platform should
screen and select campaigns proposed by seekers.

This section provided a brief review of recent literature and then proposed a set of OM research questions as
summarized in Table 4. Because online platforms are based on different innovative business models, the
proposed research questions are non-traditional. We hope these questions would motivate OM researchers
to develop exciting, and novel research in the area of online platforms.

5. Conclusions
Motivated by the success and risk factors of online platforms stated in Section 3.2, this paper has defined and
classified these platforms and described the mechanisms by which these platforms create value for different
user groups and capture value for themselves. This paper has also examined the recent literature on each type
of platform and proposed research questions for OM scholars to explore.

23
In addition to the questions proposed in Table 4, several emerging issues will inspire future research. First,
trust is a challenging issue for online platforms. For example, consider an e-commerce platform such as
Alibaba’s Taobao. Wang and Armstrong (2017) reported that, despite Alibaba has sued its sellers for selling
counterfeit goods in 2017, 50% of goods sold on Taobao are still fake or infringing on the intellectual
property rights of others. In the same vein, many users are concerned about the safety of meeting someone
online especially when the true identity of users is difficult to verify and authenticate online. To overcome the
trust issues, some online platforms are using blockchain technology, i.e., a distributed ledger managed by a
peer-to-peer network collectively adhering to a protocol for recording, verifying and validating new entries.
Specifically, by applying the blockchain technology, an online platform can track and trace a product in a
supply chain 25 or a person within a social network. For example, on a blockchain-powered online dating
platform called Matchpool, users act as “matchmakers” for their friends and niche groups by creating
“pools.” To join a pool, depending on its customized rule, a participant might need to pay an entrance fee or
subscription fee; the matchmakers receive dividends from revenue generated from their pools. 26 However, it
is of interest to examine the impact of the blockchain technology on users’ trust level of different online
platforms. For instance, can blockchain technology reduce the sales of fake products online? Will users feel
more secure if they transact on platforms powered by the blockchain technology? These questions beg for
answers as more firms are adopting this technology.

Second, this paper discussed online platforms by focusing on Web-based or mobile-based platforms.
However, the mobile platform can open up new avenues for OM researchers because mobile phones are
more accessible and affordable than internet access on desktop computers, especially in the developing
countries. More importantly, mobile platforms offer real time location data of the users that can enable online
review platforms such as Yelp to create more value by offering real time location-based advertisements to
target customers. Also, online dating platforms such as OkCupid have unveiled a geo-location app to help
connect singles living near each other. Hence, it is of interest to examine how online platforms can leverage
real time location data of their users to create more value for user groups and capture more value for
themselves.

25
Walmart, Nestle, and Unilever have formed a partnership with IBM to apply blockchain technology to improve the
traceability of their food supply chains so that these firms can improve food safety (Hackett, 2017).
26
For details about how matchmakers receive dividends from their pools, see: [Link]
/https-medium-com-flexthought-matchpool-community-owned-social-matchmaking-blockchain-71ae6129f584-
71ae6129f584.

24
Third, an online review platform is an efficient way for user groups to form affinity groups so that they can
share their personal experience. However, personal experience is subjective and it is not verifiable. As such,
legitimate concerns exist about fake reviews. However, other types of platforms based on more objective
comments can be validated by experts. Specifically, in emerging markets, NGOs and governments have
established various peer-to-peer knowledge-sharing platforms that are intended to enable farmers to post and
respond to queries about farming techniques. Unlike the review platforms discussed in Section 4.4, the
suggestions provided by farmers can be examined and rated by experts (see, for example, Chen et al., 2015 for
Avvaj Otalo, and Xiao et al., 2017 for WeFarm). When comments and reviews can be rated by independent
experts and/or by other peer farmers (after they followed the advice), it is of interest to examine if farmers
are more willing to offer better advice to other farmers.

As digital platforms continue to flourish in the business world, an excellent opportunity arises for OM
researchers to explore numerous exciting research topics and make an impact in this important field.

References
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