Determining the right time to advertise adopter numbers for a two-sided digital platform: An agent-based simulation optimization approach

Abstract

The adoption of two-sided digital platforms is influenced by cross-side network effects, that is, the number of adopters on the demand side of a platform affects the number of adopters on the supply side and vice versa. Accordingly, publicizing adopter numbers might stimulate platform success. However, finding the right point in time to do so is difficult because there is little or no research on corresponding strategies and best practices based on already successful platforms are inconclusive. This paper addresses this research gap by (i) demonstrating the impact of publicizing adopter numbers on platform growth, (ii) analyzing the effect of market characteristics on the strategic fit of such information-sharing strategies, (iii) introducing an agent-based simulation optimization tool that aims to identify the optimal number of adopters on the other side of the platform that should be reached before advertising information is begun, and (iv) illustrating the applicability of such a tool by means of a real-world use case. Agent-based modeling and simulation was chosen because the effectiveness of advertising adopter numbers depends on various interactions between (potential) platform users, which gives rise to a complex system that cannot be properly captured via traditional analytical approaches. The simulation accounts for the stakeholders’ decision processes and can support the platform operator's decision on when to start publicizing adopter numbers. The results of our numerical experiments indicate that there is no single conclusive answer to the question when advertising adopter numbers should begin, as the right time depends on the specific market characteristics.