Two and Multi-Sided Markets Robert
Two-Sided and Multi-Sided Markets: How Platforms Govern Exchange
- What does the concept mean?
A two-sided market connects two distinct groups through an intermediary, with participation or decisions on one side affecting outcomes or value on the other. Each group provides the other with network benefits, making the platform more valuable as participation grows (Katz & Shapiro, 1985). Price and openness shape participation (Rysman, 2009). A multi-sided platform generates value primarily by facilitating direct interactions between more distinct types of customers (Haigiu & Wright, 2011). Google Pay, for example, requires both consumer usage and merchant acceptance. Platforms often charge the groups they support differently: fees from one side may fund free access for another.
- Example: Google Search
Google Search connects users seeking information with advertisers seeking their attention. Users pay no monetary fee, while advertisers pay for advertising placements. More users attract advertisers, but advertising can inconvenience users. Google must manage these competing interests. Publishers add another relationship: their content makes search useful, while search visibility influences their traffic.
Google also determines rankings, data collection, and visibility. On 23 July 2026, the European Commission fined Google €890 million for favouring its own services in Google Search, in breach of Article 6(5) of the Digital Markets Act (DMA). Google was. Separately, it specified measures to implement Article 6(11): access to specified search data for eligible rival search engines on fair, reasonable, and non-discriminatory terms, with anonymisation safeguards. Even after anonymising information identifying search users, the dataset may still contain personal information about the people they searched for. The GDPR therefore still applies to that information.
- What does this explain about governance?
Two- or multi-sided market theory helps explain how commercial design choices govern exchange. Pricing, access rules, ease of use, rankings, technical standards, and data policies determine who can participate and on what terms. Growing participation can attract further participants and make entry harder for competitors. Such feedback can reinforce concentration, although monopoly is not inevitable (Shapiro & Varian, 1998; Crémer et al., 2019).
The governance concern is dependence: businesses may need a platform to reach customers while competing with its own services. Article 102 TFEU addresses abuse by dominant undertakings; the DMA imposes specified obligations on designated gatekeepers to promote contestability and fairness. Dependence alone does not establish an infringement. Platform governance therefore combines private rule-setting with public oversight.
- Where does the concept fall short?
The model explains interdependence, but whose interests count as a “side”? Users are also data sources and rights-holders; publishers and workers face different dependencies. Crawford (2021) examines AI’s reliance on human labour, energy and extracted materials. These inputs entail operating costs, but associated social and environmental harms are not reflected in prices (Crawford, 2021)! The question is whether analysis centred on transactions and participation adequately captures externalities like privacy, information power, labour conditions and environmental harm. Governance must also consider human rights, public institutions, physical supply chains and environmental costs.